Question

Suppose, from 2018 to 2019, a country’s output rose from 20,000 to 30,000 units, its capital stock rose from 5,000 to 7,000, and its labor force declined from 8,000 to 6,000. Suppose the elasticity of output with respect to capital and labor are equal to 0.4 and 0.6, respectively. Answer the following questions based on the above information:

a. How much did capital contribute to economic growth over the year?

b. How much did labor contribute to economic growth over the year?

c. How much did productivity contribute to economic growth over the year?

Answer 1

Solutions

A) It is clearly states in the question that tota capital stock was rose from 5000 to 7000 in the year 2018-19. That means an increase in total of 2000. Normally economic growth of every counntry is decided by the Gross Domestic Product (GDP). Inflows in the capital stocks means there is adverse increase in the GDP growth in long term. This will help in the economy for the growth and prospirity. Capital stock or investment are normally derived in the nature of long term investment. Normally any business does not improve in its profitablity while investing in the capital. Profit utalisation will happed in many years to go. But these investment are economically fescible that it will help in the long term economic growth in the country. Capital investmet means firm to acquire equipments for the production such as plant and machinery, computer accessories, vehicles and production equipment. Simulteniously improve in the capital investment means imporve in the labour productivity of the firm that the business to got new well advanced equipments and technology that will help to reduce the labour cost to the business and improve the economical growth in the country.  

B) In your question its clearly states that labor force decline from 8000 to 6000. That means drastic reduction of 2000. It is mainly because of the increase in the capital stocks or investment that will help to improve the production capability of the busienss to adapt latest modern technology and equipment that will be intrude in business will help to improve the labour efficenty increased and automatically creates deduction the labout expeses for the business. This will be an added advantages to the economy for the boostup.

Elasticity of putput in respect to capital & labour are 0.4 & 0.6. This is comparativel ideal coeffficent to both capital and labout. Elasticity of outout is greater than 1 means it increaethe production if it is less than 1 means decreae in return of production scale. If the elasticity is constanant menas if it is 1. It is clearly shows the elasticity of output in respect to capital and labour is more ethical that it will given the opportunity to rise in the total output of firm and increae the economic growth as well.

C) About the productivity, it is clearly states that the increase in capital stocks or investment and decrease in labor force will automatically leads to the total productivity of the business. This will leads to the growth in total output also in 2018-19. Productivity of the business lies between adequate inflows in the capital invest and reduction in the expenses that the manufacturing production. This will leads to the better productivity of the business that will leads to economic growth and simultanious improve in the economic growth also.

Answer 2

Solutions

A) It is clearly states in the question that tota capital stock was rose from 5000 to 7000 in the year 2018-19. That means an increase in total of 2000. Normally economic growth of every counntry is decided by the Gross Domestic Product (GDP). Inflows in the capital stocks means there is adverse increase in the GDP growth in long term. This will help in the economy for the growth and prospirity. Capital stock or investment are normally derived in the nature of long term investment. Normally any business does not improve in its profitablity while investing in the capital. Profit utalisation will happed in many years to go. But these investment are economically fescible that it will help in the long term economic growth in the country. Capital investmet means firm to acquire equipments for the production such as plant and machinery, computer accessories, vehicles and production equipment. Simulteniously improve in the capital investment means imporve in the labour productivity of the firm that the business to got new well advanced equipments and technology that will help to reduce the labour cost to the business and improve the economical growth in the country.  

B) In your question its clearly states that labor force decline from 8000 to 6000. That means drastic reduction of 2000. It is mainly because of the increase in the capital stocks or investment that will help to improve the production capability of the busienss to adapt latest modern technology and equipment that will be intrude in business will help to improve the labour efficenty increased and automatically creates deduction the labout expeses for the business. This will be an added advantages to the economy for the boostup.

Elasticity of putput in respect to capital & labour are 0.4 & 0.6. This is comparativel ideal coeffficent to both capital and labout. Elasticity of outout is greater than 1 means it increaethe production if it is less than 1 means decreae in return of production scale. If the elasticity is constanant menas if it is 1. It is clearly shows the elasticity of output in respect to capital and labour is more ethical that it will given the opportunity to rise in the total output of firm and increae the economic growth as well.

C) About the productivity, it is clearly states that the increase in capital stocks or investment and decrease in labor force will automatically leads to the total productivity of the business. This will leads to the growth in total output also in 2018-19. Productivity of the business lies between adequate inflows in the capital invest and reduction in the expenses that the manufacturing production. This will leads to the better productivity of the business that will leads to economic growth and simultanious improve in the economic growth also.