What are initial levels of real gdp and labor productivity

Reference no: EM13189430

In the economy of Cape Despair, the subsistence real wage rate is $15 an hour. Whenever real GDP per hour rises above $15, the population grows, and whenever real GDP per hour of labor falls below this level, the population falls. The table shows Cape Despair's production function:

Labor (billions of hours per year) Real GDP (billions of 2000 dollars)
0.5 8
1.0 15
1.5 21
2.0 26
2.5 30
3.0 33
3.5 35

Initally, the population of Cape Despair is constant and real GDP per hour of labor is at the subsistence level of $15. Then a technological advance shifts the production function upward by 50 percent at each level of labor.

a. What are the initial levels of real GDP and labor productivity?

Reference no: EM13189430

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