Assume that average work hours, the employment– population ratio and technology all remain constant in a less developed country. The country initially has $100 billion in capital. For each of the following scenarios, describe what will happen over time to the country’s (1) production possibilities frontier for capital and consumption goods; (2) capital perworker; and (3) average living standard.
a. Population grows by 2% per year, depreciation of capital stock is 2% per year, and investment (new capital production) each year is equal to 4% of capital stock at the beginning of the year.
b. Population grows by 1% per year, depreciation of capital stock is 2% per year, and investment (new capital production) each year is equal to 4% of capital stock at the beginning of the year.

c. Population is constant, depreciation of capital stock is 2% per year, and investment (new capital production) each year is equal to 1% of capital stock at the beginning of the year.