Question

If the production function for an economy had constant returns to scale, the labour force doubled, and all other inputs stayed the same, t would happen to real GDP? 

Select one: 

• It would increase by 50 percent. 

• It would stay the same. 

• It would increase, but by something less than double. 

• It would double. 

Answer 1

Sol:-

An economy’s production function has the constant-returns-to-scale property. If the economy’s labor force doubled and all other inputs stayed the same, then real GDP would

Correct option is C

C)):- increase, but not necessarily by either 50 percent or 100 percent.

For nearly 150 years, GDP per person in the US economy has grown at a remarkably steady average rate of around 2% per year. Starting at around $3,000 in 1870, per capita GDP rose to more than $50,000 by 2014, a nearly 17-fold increase.