How does the phenomenon of diminishing returns to capital explain the catch-up effect?
When an economy initially has a small amount of capital, additions to capital substantially raise workers' productivity, making it possible for poor countries with little capital to "catch up" with richer countries.
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The oversimplified multiplier formula assumes that the
A. level of consumption spending is fixed. B. price level is fixed. C. government spending is fixed. D. net exports depend on income.
John Maynard Keynes believed that a recession was caused entirely by
A. inadequate aggregate supply. B. inadequate aggregate demand. C. too much inflation. D. too much government intervention.
In the short-run macro model, adjustment toward equilibrium is facilitated by price changes
a. True b. False
A circular-flow diagram is a visual model of the economy
a. True b. False Indicate whether the statement is true or false