Consider the economy described in problem 2.7.
Briefly explain the likely changes in real GDP, the
real wage, and the real rental cost of capital under
each of the following scenarios. Include a graph
with your answers:
a. There are breakthroughs in technology that
improve the productivity of all factors of
production,
causing A to increase to 2,100.
b. A devastating earthquake causes the capital
stock to decrease to $5,000 billion.
c. A wave of immigration causes the labor force
to increase to 60 million workers.