Baumol argued that in an economy where productivity is growing in most sectors (called progressive sectors) and lagging in a few (non-progressive sectors), employment can still increase in the non-progressive sectors:
a. if employers in the non-progressive sectors lower wages.
b. by investing in more labor-saving technology in the non-progressive sector.
c. by raising prices in all sectors.
d. as long as resources are transferred to the progressive sector.
e. by transferring resources from cost-saving innovation in the progressive sector to the non-progressive sector
e. by transferring resources from cost-saving innovation in the progressive sector to the non-progressive sector
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The most effective mechanism for reducing runs on banks is _____
a. the discount rate b. deposit insurance c. the reserve requirement d. open-market operations e. the Federal Reserve note
A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7 . Assume that the economy is initially in equilibrium. What is the spending multiplier of this economy?
a. 2 b. 1.4 c. 0.7 d. 0.9 e. Cannot be determined with the given information
The long-run supply curve would be perfectly elastic when:
A. An increase in demand does not cause a change in product price B. An increase in demand causes an increase in product price C. A decrease in demand causes an increase in short-run supply D. A decrease in demand causes an increase in product price
Refer to the diagram. If aggregate expenditures in this economy are (C + I g + X n2 ), then the equilibrium levels of GDP and aggregate expenditures respectively will be:
A. 0A and 0E.
B. 0B and 0F.
C. 0A and AH.
D. 0D and DJ.