How do the labor force, the nation’s capital stock, and the rate of technical progress contribute to potential GDP growth and labor productivity?
What will be an ideal response?
Potential GDP growth depends on the growth of the labor force, nation’s capital stock, and the rate of technical progress. The effects of these three can be shown using the production function. The production function simply expresses how inputs (labor, capital, and technology) are transformed into output (real GDP).With respect to labor productivity, we can express growth rate of GDP as:Growth rate of potential GDP = Growth rate of labor input × Growth rate of labor productivityGrowth in the labor force is equivalent to growth in the labor inputs used to produce GDP. Both growth in the capital stock and technology contribute to labor productivity growth. Increases in capital and technology will shift the production function out, whereas increases in labor are shown with a movement along the production function. For example, with the advent of the computer, an individual worker can be more productive with each hour of work. Similarly, with access to a better machine (improved technology), a worker can produce more in each other of work.
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Points lying below a production possibilities curve are:
A) inefficient because more can be produced with the available resources. B) inefficient because they represent the production of only one good. C) efficient because combinations represented by those points are attainable. D) efficient because production is maximum on those points with the available resources.
In response to the overvalued dollar in the early 1970s, the German Bundesbank bought ________ and sold ________ to keep the exchange rate fixed, gaining international reserves
A) marks; dollars B) marks; pounds C) dollars; marks D) dollars; pounds
When interest rates go up, people are
a. More likely to borrow b. Less likely to borrow c. Does not affect a person's consumption d. None of the above
Because of increasing opportunity costs, the production possibility curve:
A. Is bowed out from (or concave to) the origin B. Can be either downward- or upward-sloping C. At first rises, then falls eventually D. Is a straight downward-sloping line