Question

Assume that the hypothetical economy of Molpol has 10 workers in year 1, each working 2,000 hours per year (50 weeks at 40 hours per week). The total input of labor is 20,000 hours. Productivity (average real output per hour of work) is $10 per worker Instructions: In parts a and b, round your answers to the nearest whole number. In part c, round your answer to 2 decimal places. a. What is real GDP in Molpol? 00:20:04 Suppose work hours rise by 1 percent to 20,200 hours per year and labor productivity rises by 4 percent to $10.4 b. In year 2, what will be Molpol's real GDP? c. Between year 1 and year 2, what will be Molpol's rate of economic growth? percent

Answer 1

The real GDP in Molpol in year 1 is $200,000. In year 2, the real GDP will be $210,080. The rate of economic growth between year 1 and year 2 is 5.04%.

Step-by-step explanation:

To calculate the real GDP in Molpol in year 1, we multiply the total input of labor (20,000 hours) by the productivity per worker ($10 per hour). This gives us a real GDP of $200,000.

In year 2, with an increase in work hours to 20,200 and a productivity increase to $10.4 per hour, we can calculate the real GDP by multiplying the total input of labor (20,200 hours) by the new productivity per worker ($10.4 per hour). This gives us a real GDP of $210,080.

To calculate the rate of economic growth between year 1 and year 2, we use the formula: (Real GDP in year 2 - Real GDP in year 1) / Real GDP in year 1. Substituting the values we calculated earlier, we have: (210,080 - 200,000) / 200,000 = 0.0504, or a growth rate of 5.04%.