How does the new growth theory explain economic growth?
What will be an ideal response?
The new growth theory explains growth as the result of choices made in the pursuit of profit. If people choose to look intensively for new technologies they will be found more quickly. Profit is the motive to look for technological change. The reason is that competition squeezes profits. Firms are constantly looking for ways to reduce costs and increase profits through technological change. The economy can grow forever as long as people make the choices that encourage the search for new technologies.
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Something that changes incentives so as to make otherwise empty threats or promises credible is called a:
A. dominant strategy. B. commitment device. C. strategic device. D. Nash equilibrium.
If the fluctuations in the economy’s real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show the
A. worst recession occurs when output expands most rapidly. B. slowest inflation occurs when output expands most rapidly. C. slowest economic growth occurs when output grows most rapidly. D. most rapid inflation occurs when output expands most rapidly.
Bubba Burgers has discovered there are economies of scope available to the restaurant. Which is most likely to be a response to this discovery?
A) Bubba adds more varied inputs to burger production. B) Bubba expands burger production, focusing on that one good. C) Bubba contracts burger production. D) Bubba adds grilled chicken sandwiches to the menu. E) Bubba cuts back on the diversity of the menu.
Which of the following is necessary for a system of marketable pollution permits to lead to beneficial trades between polluting companies?
A. Companies must have common abatement costs. B. There must be differences in abatement costs between companies. C. Company owners must have a social conscience and must be devoted to pollution abatement. D. The government must direct companies toward beneficial trades.