What are the factors that affect GDP according to the aggregate production function used by Solow?
What will be an ideal response?
The aggregate production function used by Solow expresses GDP as a function of three factors of production. These are:
a) physical capital.
b) total efficiency units of labor.
c) level of technology.
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The term "open market operations" refers to the:
a. loan-making activities of commercial banks. b. effect of expansionary monetary policy on interest rates. c. operation of competitive markets in the banking industry as the result of deregulation. d. buying and selling of government securities by the Federal Reserve.
One of the reasons why wages are "sticky downward" is that union workers often operate under a multiyear contract with a company and make wage reductions difficult or impossible during the contract period
a. True b. False Indicate whether the statement is true or false
Which of the following statements does not apply to a market economy?
a. Firms decide whom to hire and what to produce. b. The "invisible hand" usually maximizes the income of society as a whole. c. Households decide which firms to work for and what to buy with their incomes. d. Government policies are the primary forces that guide the decisions of firms and households.
Preferences have just shifted away from beef and into mutton. If you are a sheep rancher, the best profit-maximizing strategy is to
A. shift some of your ranching capacity into cattle raising. B. shut down. C. cut prices to increase market share. D. produce as much as possible to earn profits in the short run.