Suppose production in an economy is represented by a Cobb-Douglas ...

[rlane42]

Suppose production in an economy is represented by a Cobb-Douglas production function.
 
  If each worker in the economy becomes more productive while the number of workers in the economy, the capital stock and the state of technology remains unchanged, ________.
  A) the inflation rate in the economy will decrease
  B) the exchange value of its currency will increase in the foreign exchange market
  C) the income per capita of the economy will decrease
  D) the gross domestic product of the economy will increase

Question 2

If the demand for used cars decreases after the price of a new car falls, used cars and new cars are
 
  A) substitute goods.
  B) inferior goods.
  C) normal goods.
  D) complementary goods.
  E) The questions errs because it is the quantity of used cars, NOT the demand for used cars, that will change when the price of a new car falls.

[Smiles0805]

Answer to Question 1

D

Answer to Question 2

A