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Scenario: Two neighboring countries, Sweetland and Sourland, are identical in terms of size, ...

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Scenario: Two neighboring countries, Sweetland and Sourland, are identical in terms of size, ...

Scenario: Two neighboring countries, Sweetland and Sourland, are identical in terms of size, population (800,000), education of workforce, and value of natural resources owned.

Refer to the scenario above. Over time, Sourland's aggregate production function shifts upward. Why might this be the case?

▸ The number of educated people in Sourland has increased.

▸ Research and development undermine the output of physical labor.

▸ More output can be produced with the same amount of physical capital stock and total efficiency units of labor.

▸ The corporate tax rate has been reduced.

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

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