Labor productivity is $20 per hour and aggregate hours are 400 billion hours
a. What does real GDP equal?
b. Because of technological advances, labor productivity doubles to $40 per hour.
Furthermore, assume that aggregate hours decrease to 300 billion hours. What does real GDP equal?
a. Real GDP equals (labor productivity × aggregate hours) = ($20 per hour × 400 billion hours) = $8 trillion.
b. Real GDP now equals $12 trillion.
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The Who-Needs-A-Doctor? Company makes a do-it-yourself rhinoplasty kit. The company is deciding whether to include a safety feature that would cost $40 for each kit
The company estimates the probability of death without the safety feature is 1/10,000 and the death cost per kit is $50. Based on this information, answer the following questions: a. What is the value the company has placed on a life? b. What is the company's cost-benefit recommendation? c. If the company has overestimated the probability of death and the true probability of death is 1/15,000, what is the true death cost per rhinoplasty kit? d. If the company has overestimated the probability of death and the true probability of death is 1/15,000, what would the true cost-benefit recommendation be for the company? e. If the company has correctly estimated the probability of death but has underestimated by one-half the true value of a life, what is the true death cost per rhinoplasty kit? f. If the company has correctly estimated the probability of death but has underestimated by one-half the true value of a life, what would the true cost-benefit recommendation be for the company?
How would monetary easing by the Bank of Japan affect the value of the yen?
A) It increases it since more people will take out loans at the low interest rates. B) It reduces it since it reduces demand for yen since Japanese interest rates are now lower. C) It increases it since it increases demand for yen since Japanese interest rates are now higher. D) It reduces it since the supply of yen on the foreign exchange market is now lower.
According the traditional Keynesian approach, an increase in government spending is effective in raising real Gross Domestic Product (GDP) if
A) the price level is fixed. B) the price level is flexible. C) the price level does not exist. D) Ricardian equivalence occurs, regardless of the price level.
Define the following terms and explain their importance to the study of economics
a. demand b. surplus c. equilibrium d. law of supply and demand e. quantity demanded