Consider a small open economy whose demand and domestic supply of capital relationships are R = 30 - (1/2)K and K = 7R,respectively (where K and R denote capital and its marginal product).Capital is perfectly mobile internationally,and the yield on capital (R)in the rest of the world is 6.
I: GNP exceeds 90 percent of GDP in this country.
II: Labour's share of GDP in this country is two-thirds.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.

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The Answer of Consider a small open economy whose demand and domestic supply of capital relationships are R = 30 - (1/2)K and K = 7R,respectively (where K and R denote capital and its marginal product).Capital is perfectly mobile internationally,and the yield on capital (R)in the rest of the world is 6.
I: GNP exceeds 90 percent of GDP in this country.
II: Labour's share of GDP in this country is two-thirds.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.

Consider a Small Open Economy Whose Demand and Domestic Supply