Suppose the President asks you to write him a letter suggesting ways the government might help the economy achieve permanently higher rates of economic growth
Based on your understanding of growth theory and growth accounting, what would you suggest?
According to both neoclassical and new growth theories, the key to faster growth is generating higher rates of technological progress. Because many technological advances are embodied in new capital, sustaining a high rate of saving and investment is important. Government might help stimulate saving supply by tax incentives such as IRAs and stimulate investment demand by offering investment tax credits, accelerated depreciation and reductions in corporate profit tax rates. New ideas are also embodied in human capital. Government can finance education and training directly and provide low-interest loans to students and training tax credits to businesses. Finally, we need to generate more new ideas, by stimulating research and development efforts. This includes government funding of basic research and tax credits to businesses for R&D expenses.
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The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.
In the figure above, an increase in z leads to a
A) movement down along one of the lines showing the relationship between x and y. B) rightward shift of the line showing the relationship between x and y. C) trend change in both x and y. D) leftward shift of the line showing the relationship between x and y. E) movement up along one of the lines showing the relationship between x and y.
Why do CDs have lower rates of return than stocks?
A) CDs are much riskier investments than stocks. B) CDs are less risky than stocks. C) CDs are not taxed while stock s returns are taxable. D) CDs are not as liquid as stocks.
In the figure above, the combination of computers and televisions shown by point X A) is not attainable at the point in time for which the graph is drawn. B) can be attained only if some of societies resources are unemployed. C) suggests that the law of increasing relative costs does not hold. D) results only because society allocates its resources inefficiently.