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A country has 10 percent unemployment. The production function is Cobb-Douglas with = . .

• (a)By how much will production increase if unemployment is reduced to 5 percent while the capital stock, the labour force, and technology are unchanged? Explain your result.
• (b)If unemployment remains permanently on the lower level, is it likely that the capital stock will remain unchanged?
• (c)Describe what happens to (i) output per capita and (ii) output per worker in the short term and the long term.