Question

10. |L ptj As an alternative to the story of Robinson Crusoe, macroeconomists use the

aggregate production function," written as Y = AF(L,K,H,N), to link economy-wide

output Y to the number of workers L, the stock of physical capital K, the stock of human

capital H, the stock of natural resources N, and stock of technological knowledge A.

With reference to this aggregate production function, please indicate whether each of

the following statements is true or false.

(a) The aggregate production function exhibits "constant returns to scale" if doubling

the four inputs - workers L, physical capital K, human capital H, and natural

resources N - while holding the stock of technological knowledge A fixed leads to

a doubling of outplut.

(b) The aggregate production function exhibits "constant returns to scale if tripling

the four inputs workers L, physical capital K, human capital H, and natural

resources N - while holding the stock of technological knowledge A fixed leads to

a tripling of output.

(c) When the aggregate production function exhibits constant returns to scale, it

implies that productivity Y/L is determined by the stock of physical capital per

worker K/L, the stock of human capital per worker H/L, the stock of natural

resources per worker N/L, and the stock of technological knowledge A.

(d) The aggregate production function shows that productivity may still increase,

even in the face of dwindling stocks of natural resources N, if the stock of tech-

nological knowledge A continues to grow.

​

Answer 1

Explanation:

d. Securitization

worker K/L, the stock of human capital per worker H/L, the stock of natural

resources per worker N/L, and the stock of technological knowledge A.

(d) The aggregate production function shows that productivity may still increase,

even in the face of dwindling stocks of natural resources N, if the stock of tech-