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Scenario: Capital
An economy initially has 200 units of physical capital per worker. Each year it increases the amount of physical capital by 10%. According to the aggregate production function for this economy, each 1% increase in physical capital per worker, holding human capital and technology constant, increases output per worker by 0.25%.
-(Scenario: Capital) Look at the scenario Capital. In three years' time, what is the level of physical capital per worker in this economy?

Question

Quizplus · Accepted Answer

In one year, the physical capital per worker increases to:
200 x 1.1 = 220 units
In two years, it increases to:
220 x 1.1 = 242 units
In three years, it increases to:
242 x 1.1 = 266.2 units.

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