You are hired as an economic consultant to the countriesof Albernia and Brittania. Each

Chapter 7, Problem 4

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You are hired as an economic consultant to the countriesof Albernia and Brittania. Each countrys current relationshipbetween physical capital per worker and output perworker is given by the curve labeled Productivity1 in the accompanying diagram. Albernia is at point A and Brittaniais at point B.a. In the relationship depicted by the curve Productivity1,what factors are held fixed? Do these countries experiencediminishing returns to physical capital per worker?b.Assuming that the amount of human capital per workerand the technology are held fixed in each country, can yourecommend a policy to generate a doubling of real GDP percapita in Albernia?c. How would your policy recommendation change if theamount of human capital per worker and the technologywere not fixed? Draw a curve on the diagram that representsthis policy for Albernia.

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