Principles of Macroeconomics (11th Edition)
11th Edition
ISBN: 9780133023671
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 7, Problem 11P
To determine
Capacity of Economy.
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Principles of Macroeconomics (11th Edition)
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- Show how a fall in the matching efficiency technology can effect output, wages, the unemployment and vacancy rates. How could economists differentiate this from a fall in labor productivity if they could view the four above pieces of data over many years? [In other words, how would these two events produce different patterns in the data?]arrow_forwardConsider an economy where the elasticity of output with respect to capital is 0.4 and the elasticity of output with respect to the labor input is 0.6. Assume that the growth rate of output is 3%, the growth rate of capital is 1%, and the growth rate of the labor input is 2%. (a) What is the rate of productivity growth?arrow_forwardIn 1776, Adam Smith ([1776] 1936) published his treatise, An Inquiry into Nature and Causes of the Wealth of Nations , which was taken by many to be a theory of economic growth. Smith, however, was clearly concerned with economic development. The classical school of economic thought, predominantly modeled after Smith, is largely geared toward understanding and explaining economic development. Smith presented a supply driven model of growth, where output was related to labor, land, and capital. Thus, economic growth, which is the increase in output, was related to population growth, investment, land growth, and increases in productivity. According to Smith, society was dependent on the economy’s ability to sustain its increasing workforce. Investment was dependent on the rate of savings. Land growth was dependent on the ability to acquire more land (through conquest) or on the increase in the productivity of existing land. He also believed in the division or specialization of labor as a…arrow_forward
- In 1776, Adam Smith ([1776] 1936) published his treatise, An Inquiry into Nature and Causes of the Wealth of Nations , which was taken by many to be a theory of economic growth. Smith, however, was clearly concerned with economic development. The classical school of economic thought, predominantly modeled after Smith, is largely geared toward understanding and explaining economic development. Smith presented a supply driven model of growth, where output was related to labor, land, and capital. Thus, economic growth, which is the increase in output, was related to populationgrowth, investment, land growth, and increases in productivity. According to Smith, society was dependent on the economy’s ability to sustain its increasing workforce. Investment was dependent on the rate of savings. Land growth was dependent on the ability to acquire more land (through conquest) or on the increase in the productivity of existing land. He also believed in the division or specialization of labor as a…arrow_forwardFour of the determinants of economic growth relate to supply side, i.e. the physical ability of the economy to produce. Which of the following is not one of those? Select one: a. Increases in the quantity and quality of natural resources. b. Increases in the supply (or stock) of capital goods. c. Improvements in technology. d. Increases in the quantity and quality of human resources. e. Efficient financial institutionsarrow_forwardSuppose the government undertakes a large spending program to build community colleges and to make higher education free for many low-income families. How would you expect the program to affect output in the short run? Assuming that the program succeeds in increasing the skills of some workers, how would you expect it to output in the long run?arrow_forward
- 1. Aggregate economic output grows by 6% per year. Capital supply grows at 2% per year and labor supply grows at 4% per year. Capital and labor have equal factor shares. What is the growth rate of total factor productivity? Enter your answer in the space below as a number without a percentage sign. For example, if your answer is “12%” enter “12”.___________arrow_forwardRefer to the graph shown below. At point A: Which is true? A: the economy has full employment B: economic growth is declining C: inflation tends to be declining D: wages can be lowered due to worker surplusarrow_forward1. Suppose a medical study reveals new benefits to consuming beef and at the same time a bumper corn crop reduces the cost of feeding steers (male cow/ox). The equilibrium quantity of beef will _____________. (Hint: Draw your demand and supply curves) Group of answer choices a. stay the same b. definitely decrease c. definitely increase d. perhaps increase, decrease, or stay the same, but more information is needed to determine which it does 2. New growth theory (i.e., endogenous growth theory developed by 2018 Nobel Prize Links to an external site.winner Paul Romer Links to an external site.) is the theory that: Group of answer choices a. our unlimited wants will lead us to greater productivity and perpetual economic growth due to choices in pursuit of profits. b. when a decrease in labor productivity decreases real GDP per person the new prosperity brings a population explosion. c. the population contraction brings real GDP per person to a higher level. d. the clash…arrow_forward
- Which of the following statements about capital are correct? a) In economic jargon capital is the net worth of a business enterprise. b) Capital is defined as anything that is produced that then produces other things c) An increase in capital will grow the economy because capital is a resource in the production process and an increase in resources increases the production possibilities or potential production of the economy. d) Capital represents the tools that labor uses and thus an increase in capital tends to increase the productivity of labor (and possibly other resources) and that magnifies economic growth. e) Most technological advances involve improvements to the tools of production, which is capital, so embodiment of new technology in capital is yet another way capital fosters economic growth. f) increasing capital in the economy has to lead to greater income inequality, since most capital is owned by the rich.…arrow_forwardWhich variables are now having an effect on business, and which challenges will be faced by companies in the United States in the next years?arrow_forwardGiven the production function Y=A(K,L,N,H), what is the role of money in generating long run growth in Y? A.) money increases economic trade and thus increase Y B.) money increases prices making it more profitable to produce C.) money plays no role in determining long run economic activity D.) money being the root of all evil harms economic growtharrow_forward
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