Question

A small economy increased its capital per hour worked (k/l ) from $40,000 to $50,000. As a result, real GDP per worker (Y/L) grew from $20,000 to $25,000. If the economy increases its capital per hour worked from $50,000 to $60,000, but there is no change in technology, by how much more and in what direction will output per worker change?A. output per worker will fall by more than $5000B. output per worker will increase by more than $5000C. output per worker will increase by exactly $5000D.output per worker will increase by less than $5000

Answer 1

D.output per worker will increase by less than $5000

Step-by-step explanation:

based on the concept of depreciation, an increase in capital per worker hour for the second time will lead to a less than proportionate increase in real GDP per worker .Therefore, another $10,000 increase in capital per hour will lead to a less than $5000 increase in real GDP per worker.

So, correct option is (D)