Apec 3006 a4 - Apec 3006 Assignment 4 Yan Li 1(10980*100%=36.25 80 In the equation only K changes to 2K however L stays the same so the total growth

Apec 3006 a4 - Apec 3006 Assignment 4 Yan Li...

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Apec 3006 Assignment 4 Yan Li 1. a. Y%= ( 109 80 ) 80 *100%=36.25% In the equation, only K changes to 2K; however, L stays the same, so the total growth rate is less than 100%. b. W/R will increase. The R is the cost of capital renting, market will have more capital (K to 2K), and the cost of capital renting will be cheaper. If the wage of labor stays the same, the value of W/R will increase. We can also consider the slope of new equilibrium condition, the slope of new line increases, and W/R increases. The intuition is that the increase in L can bring more increase in K than previous condition. 2 a. Y%= ( 160 80 ) 80 *100%=100% b. W/R doesn’t change, because the ratio between L and K doesn’t change, which
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