Assume a production function Q=0.65(L=1, K=2, HK=3, NR=4) [L,K, HK and NR represents labor capital ,human capital and natural resource respectively and 0.65 is technology coefficient].

a) Now if a magical forest has been created suddenly that is enriched with minerals and various species of trees. Which of the factors of production will be impacted and how will it change into production function? Explain this with the help of suitable graphs.

b) What will happen to real GDP and price level in long run? Explain with the help of suitable graph.[a) and b) are related questions]

c) Suppose a country “Z” currently imports and produces most of the manufacturing goods locally following the old strategy of production. In 2023, if most of the manufacturing firms in country “Z” starts using its resources more on the R &D (Research and Development) and innovations rather than only production, will country Z’s growth pattern be like exogenous growth? Why or why not?

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