Last year the imaginary country of Basova had a population of 10,000, 6,000 people worked 8 hours a day, and produced a real GDP of $30,000,000 . The imaginary country of Andovia had a population of 12,000, 8,000 people worked 8 hours a day, and produced a real GDP of $38,000,000 . Which of the following is correct?
a. Basova had higher productivity and higher real GDP per person.
b. Andovia had the higher productivity and higher real GDP per person.
c. Basova had the higher productivity while Andovia had the higher real GDP per person.
d. Andovia had the higher productivity while Basova had the higher real GDP per person.
c
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When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
The classic example of a detrimental externality is
a. education. b. pollution. c. discovery of an AIDS vaccine. d. Mrs. Lewis' prize-winning rose garden.
In the view of rational expectations theory:
A. People make economic forecasts that are based on insider-outsider relationships and self-fulfilling prophecies B. People form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur C. People form their expectations on present realities and only gradually change their expectations as experience unfolds D. The economy does not respond quickly to changes in prices, which causes a mis-allocation of economic resources
What is the consensus among economists and other monetary policy experts regarding the usefulness of the monetary policy instruments available to central banks in normal times?
What will be an ideal response?