One application of the production possibilities concept has been to explain the difference in growth patterns of a nation with a high level of investment (Alta) and an equivalent nation with a low level of investment (Zorn). Use the concept to explain
why Alta’s economic growth would be greater than that of Zorn over time.
Please provide the best answer for the statement.
The application suggests the trade off illustrated by a production possibilities curve with consumption spending on one axis and investment spending on the other axis. In Alta the combination of consumption and investment spending is heavily weighted toward investment. In Zorn investment spending is a smaller percentage of domestic output. If investment were measured on the vertical axis and consumption on the horizontal axis, Alta’s optimal selection would be much higher on its production possibilities curve than would be the selection in Zorn. As a result of this larger proportion of income spent on investment goods, Alta’s capital resource base and its economy grow more rapidly, which means its production possibilities curve shifts outward at a more rapid pace over time.
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The aggregate demand curve shows the relationship between inflation and:
A. short-run equilibrium output. B. the real interest rate. C. the exchange rate. D. the nominal interest rate.
If not all goods are essential, a consumer will end up optimizing at a corner solution.
Answer the following statement true (T) or false (F)
An expansion occurs when ________, when ________, or when both of these occur.
A. potential output grows rapidly; actual output rises above potential output. B. potential output grows slowly; actual output equals potential output C. potential output grows slowly; actual output rises above potential output D. potential output grows rapidly; actual output equals potential output
If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100, what is the coupon rate?
A) 2% B) 5% C) 10% D) 20%