APF

Question 1

dd

Answer 1

education increas leading to increase in workforce
training of workers improve

Question 2

What is the Aggregate Production Function (APF)?

Answer 2

The Aggregate Production Function (APF) is an economic model that describes the relationship between total output (usually measured as real GDP) and the inputs used in production.

Question 2

How does the Law of Diminishing Returns apply to production?

Answer 2

Hiring more workers initially increases production capabilities, but beyond a certain point, each additional worker contributes less to overall output, illustrating diminishing returns.

Question 2

What is the Law of Diminishing Returns?

Answer 2

The Law of Diminishing Returns states that as the usage of one input (e.g., labor) increases while other inputs (e.g., capital) remain constant, the output will initially rise but at a decreasing rate.

Question 2

How does an increase in the quantity of capital affect the Aggregate Production Function (APF) curve?

Answer 2

Increasing the quantity of capital shifts the APF curve upwards, indicating higher potential output levels for the economy.

Question 2

What are the “3 P’s” that determine an economy’s potential growth?

Answer 2

The “3 P’s” are:

Population Growth
Participation (Labor force participation)
Productivity

Question 2

What is the distinction between potential growth and actual growth in an economy?

Answer 2

Potential growth is determined by factors like population, participation, and productivity, whereas actual growth is influenced by consumption, investment, government expenditure, and net exports.

Question 3

How does population growth contribute to economic growth?

Answer 3

opulation growth contributes to economic growth because:

It increases demand for goods and services.
It enlarges the labor force, potentially boosting production.
Migration-driven population growth can bring in skills, knowledge, and wealth from abroad, further promoting economic growth.

Question 3

eg of law of diminishing retunr

Answer 3

Example:

Scenario: A factory with workers.

Explanation:

• Hiring more workers can increase production capabilities.
• However, beyond a certain point, adding more workers may lead to diminishing returns.
• Each additional worker contributes less to o
• verall output.

Link to economic growth

So far we have held capital goods constant.

If the quantity of capital did increase, it would move the APF curve upwards.