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The economy of North Haverbrook is comprised of 30,026 working able inhabitants and hold a capital...

The economy of North Haverbrook is comprised of 30,026 working able inhabitants and hold a capital stock of 45,000. Through empirical work, it was discovered that the share of labor income (wage) was 10% of GDP (turns out they don't have schools), the share of capital was 90% and that using a cobb-Douglas production function was able to properly approximate the production behavior of this economy. And that tech (A) is 1.

  1. [2 points] what will be North Haverbrook's output?

  2. [2 points] what is the equilibrium real wage rate?

  3. [2 points] what is the equilibrium real capital rental rate?

  4. [3 points] Given its current situation, should North Haverbrook follow a policy to increase its labor force, or increase its capital stock? (having for goal to increase output). Why? Show your logic.  

  5. [3 points] Given its currency situation (independent of d) ), should North Haverbrook follow a policy which would increase schooling, which will increase the share of labor to 15% (share of capital changes to 85%), or should it alternatively increase capital stock by 1000. Which will be its best option (having for goal to increase output). Why? Show your logic.  

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