Question

Assuming that the amount of human capital per worker and the technology are held fixed in each country, can you recommend a policy to generate a doubling of real GDP per capita in Albernia from $20,000 to $40,000? Albernia should increase its human capital per worker to $30,000. Albernia should increase its physical capital per worker to $30,000. Albernia should increase its physical capital per worker to $20,000. Albernia should increase its level of labor.

Answer 1

Albernia should increase its physical capital per worker to $30,000.

Step-by-step explanation:

Since Albernia and Britannia have the same relationship between physical capital per worker and output per worker (as shown in the attached graph), Albernia must increase physical capital per worker to $30,000. This way, it will match Britannia's physical capital per worker, and worker output should also match (should increase to $40,000) due to the same relationship between the factors of production.