Suppose that the table below shows an economy’s relationship between real output and the inputs needed to produce that output:
| Input Quantity | Real GDP |
| 300.00 | $400 |
| 225.00 | 300 |
| 150.00 | 200 |
Instructions: Round your answers to 2 decimal
places.
a. What is the level of productivity in this economy?
.
b. What is the per-unit cost of production if the price of each
input unit is $4?
$.
c. Assume that the input price increases from $4 to $5 with no
accompanying change in productivity. What is the new per-unit cost
of production?
$.
In what direction would the $1 increase in input
price push the economy’s aggregate supply curve?
The aggregate supply curve would shift to the (Click to select)right/left.
What effect would this shift of aggregate supply have on the price level and the level of real output? (Click to select)
Both the price level and real output would remain the same
The price level would decrease and real output would increase
The price level would increase and real output would decrease
The price level would decrease and real output would remain the same.
d. Suppose that the increase in input price does not occur but,
instead, that productivity increases by 50% percent.
Instructions: Round
your answer to 3 decimal places.
What would be the new per-unit cost of
production?
$.
What effect would this change in per-unit
production cost have on the economy’s aggregate supply curve?
The aggregate supply curve will shift to
the (Click to select)right/left.
What effect would this shift of aggregate supply have on the price level and the level of real output? (Click to select)
The price level would decrease and real output would increase
Both the price level and real output would remain the same
The price level would increase and real output would decrease
The price level would decrease and real output would remain the
same.
a). What is the level of productivity in this economy?
=Total output/Total inputs
=400+300+200/300+225+150
=1.33
b). What is the per-unit cost of production if the price of each
input unit is $4?
=4*(300+225+150)/400+300+200
=3
c). Assume that the input price increases from $4 to $5 with no
accompanying change in productivity. What is the new per-unit cost
of production?
New per unit cost of production = 5*675/900 = 3.75
-The aggregate supply curve would shift to the left.
-The price level would increase and real output would decrease
d. Suppose that the increase in input price does not occur but, instead, that productivity increases by 50% percent.
Total GDP would increase to 900+450 = 1350
Per unit production cost = 4*675/1350 = 2
-The aggregate supply curve will shift to the right
-The price level would decrease and real output would increase
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