Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 31, Problem 2.3P
To determine
The role of tax proposals on the
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Which of the following is a true statement?
Multiple Choice
Economists who support economic growth say that it is the most practical route to the higher standards of living that the vast majority of people desire.
Most economists believe that the recent rise in the average rate of productivity growth implies an end to the business cycle.
Most economists believe that increases in real GDP actually produce decreases in overall economic well-being because of spillover costs.
Mainstream economists disagree as to whether the rate of productivity growth was higher between 1995 and 2012 or between 1973 and 1995.
Which of the following is the most likely to happen during a period of economic growth?
Wages are lower.
There is an increase in the amount of goods produced.
The price of certain products rises and falls during the year.
The government is forced to take money from the Federal Reserve system to increase the money supply.
The great 18th century economist Adam Smith wrote
“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.”
Explain how each of the three conditions Smith describes might promote long run economic growth.
Chapter 31 Solutions
Principles of Economics (12th Edition)
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- Assume that the growth rate of the capital stock in each period is determined by the level of output in the previous period. 1) An economy of 80 million people has ten percent of them engaged in research and development, where their productivity is 0.0035. The economy is on a balanced growth path, when suddenly 2.88 million people move from goods production into R&D, raising the fraction there to 13.6 percent. In the one period that begins with this labor reallocation, the growth rate of output is ________. [Refer to the instruction above.] A) 2.8% B) 0.0% C) 3.8% D) 2.2%arrow_forwardIf a country is experiencing a relatively high rate of inflation, what impact will this have on the country’s long-term rate of economic growth?arrow_forwardSuppose that society decided to reduce consumption and increase investment. How would this change affect economic growth? What groups in society would benefit from this change?What groups might be hurt?arrow_forward
- The great 18th-century economist Adam Smith wrote,"Little else is requisite to carry a state to its highest degree of opulence from the lowest barbarism but peace, easy taxes and a tolerable administration of justice:all the rest being brought about by the natural course of things."Explain how each of the three conditions Smith describes would promote economic growth.arrow_forwardLong-run economic growth can occur as a result ofarrow_forwardWhat are the two major determinants of the overall growth of the economy according to the view of economic growth based on labor data?arrow_forward
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