Question: 1 an economy has the following aggregate production function y...
1) An economy has the following aggregate production function: Y= Ak^1/3L^2/3 and capital stock, labour supply and total factor productivity of 512, 1000, and 5 respectively.
a) What is the effect of a 50% change in the capital stock on the marginal product of labour and the marginal product of capital?
b) What is the effect of this change in the capital stock on Output and Consumption, if taxes are 800 and the Marginal Propensity to Consume is 2/3?
I am struggling with these questions. Could someone please help me with these questions thanks ahead