Economists believe that the development of a new technology provides a way for an economy to sidestep the diminishing marginal returns of capital deepening. What is the reason behind such belief?
The ability of capital deepening by itself to generate sustained economic growth is limited, since diminishing returns will eventually set in. However, countries can still experience large increases in growth due to technological innovations. Improvements in technology shift the aggregate production function and therefore allow more output per unit of capital. With the combination of technology and capital deepening, the rise in per capita GDP in high-income countries does not need to fade away because of diminishing returns. The gains from technology can offset the diminishing returns associated with capital deepening.
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The AD curve is a graph depicting the
A) relationship between the price level and the quantity of real GDP demanded. B) relationship between the price level and potential GDP. C) relationship between the price level and the quantity of real GDP supplied. D) business cycle during expansions and recessions. E) relationship between the aggregate quantity of real GDP demanded and the aggregate quantity of real GDP supplied.
Suppose the economy of Georgia can produce pecans and peanuts. Suppose the economy can either produce 10,000 pecans or 15,000 peanuts if full specialization in one good were to occur
What is the opportunity cost of increasing pecan production from 5,000 to 10,000 pecans? A) 1,000 peanuts B) 5,000 peanuts C) 7,500 peanuts D) 10,000 peanuts
Which of the following models has as its central idea that workers and firms have rational expectations?
A) the new classical model B) the monetarist model C) the real business cycle model D) the new Keynesian model
In the short-run, an increase in government purchases will cause
A) a shift of the DD curve to the left and an increase in output. B) a shift of the DD curve to the right and a decrease in output. C) a shift of the DD curve to the left and a decrease in output. D) a shift of the DD curve to the right and an increase in output. E) a shift of the DD curve the left and an appreciation of the currency.