Explain the impact of capital deepening on workers
What will be an ideal response?
Capital deepening is an increase in the amount of capital per worker. In a full-employment economy under the assumption that the supply of labor is fixed, an increase in capital shifts the production function upwards because more output can be produced with the same amount of labor. Firms will therefore increase their demand for labor because the marginal benefit from hiring labor will increase. The real wage also rises. Thus workers will enjoy higher wages, and total GDP in the economy will increase.
An increase in the saving rate causes the production function to shift upwards.
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The neoclassical theory of investment
A) links investment spending to stock prices. B) emphasizes that current investment spending depends positively on the expected future growth of GDP. C) emphasizes the role of real interest rates and taxes as determinants of investment. D) suggests that a downturn in real GDP will lead to a sharp fall in investment, which leads to further reductions in GDP through the multiplier.
A bank reports reserves of $100,000, government securities of $250,000, loans of $750,000, checkable deposits of $900,000, and owners' equity of $200,000
The desired reserve ratio is 10 percent and the bank wants to hold as reserves only the amount it is required to hold. What is the amount of excess reserves for this bank? Show your work.
The long-term pattern of American foreign trade policy from 1789 to 1914 was
(a) protectionist at first, becoming more liberal before 1861, then more protectionist again. (b) liberal at first, becoming more protectionist before 1861, then shifting to greater liberalism as the country's industrialization spread in the later 19th century. (c) free trade after the Civil War, but very protectionist in general before 1861. (d) none of the above.
Which of the following is TRUE of the Federal Reserve System?
a) It is controlled by the executive branch of the federal government. b) It is subject to oversight from Congress. c) It is not the central bank of the United States. d) It was established as part of the U.S. Constitution.