What is the main shortcoming of the neoclassical growth model and how does the new growth theory address this shortcoming?
What will be an ideal response?
One difficulty with the neoclassical model is that it predicts all nations will converge to the same level of per capita income. The new growth theory is based on the idea that technological change results from the choices that people make in the pursuit of profit. So if people in different nations face different incentives to innovate, technological progress and hence economic growth can differ among nations.
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If potential output equals 3,000 and short-run equilibrium output equals 3,500, there is a(n) ________ gap and the Federal Reserve must ________ real interest rates in order to close the gap.
A. expansionary; raise B. recessionary; not change C. recessionary reduce D. recessionary; raise
Based on the table for the federal tax burden, which earners pay more than 20% of their income in federal taxes?
a. the bottom 20%
b. all but the bottom 20%
c. the third 20%
d. the highest 20%
Goods that are subject to excludability provide examples of private goods.
Answer the following statement true (T) or false (F)
If no foreign residents owned any of the U.S. public debt, then it would be TRUE that
A. there would be no interest payments on the public debt. B. U.S. residents would essentially owe the public debt to themselves. C. there would be no distributional consequences associates with he public debt. D. the public debt would naturally disappear over time.