Gce Model Questions Vol1 2021 Economics Question 41
Practice objective / multiple choice question 41 from the 2021 Gce Model Questions Vol1 Economics examination.
An economy is described by the Cobb‑Douglas production function \(Y = A K^{\alpha} L^{1-\alpha}\) with parameters \(A = 1\) and \(\alpha = 0.3\). The current capital stock is \(K_{0}=2000\) (billion) and the labour force is \(L_{0}=100\) million. Population (and hence labour) grows at 2 % per year and capital depreciates at 5 % per year. The government wishes to raise real GDP per‑capita by 4 % over the next five years. Assuming all net investment is financed by foreign direct investment and that the capital stock grows uniformly each year, what constant amount of foreign direct investment (in billions) must be made each year to achieve the target?
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About This Question
This is Gce Model Questions Vol1 2021 Economics Question 41. It is one of the objective questions from the 2021 Gce Model Questions Vol1 Economics examination.
Difficulty level: Hard .
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