The basic idea behind the convergence theory is:
A. also the basic idea behind the catch-up effect.
B. each additional unit of capital provides larger gains when you're coming from behind.
C. that countries starting at low levels of income will tend to grow at much faster rates than those starting with high levels of income.
D. All of these are true.
Answer: D
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The ________ the proportion of one's budget spent on a good, the ________ the elasticity of demand
A) greater; lower B) greater; greater C) lower; greater D) lower; more responsive
Which is the most likely reason why more students continue on to graduate school when the economy is in bad shape and job prospects are poor?
A) They finally see the value of continuing their education. B) They are pressured by parents to stay in school a few more years. C) Their opportunity cost of attending college has fallen. D) They are irrational in this case, as they will have to take on more debt to finance the graduate degree.
"According to the neoclassical growth theory, national incentives to save, invest, accumulate human capital, and develop new technology influence the country's growth rate of real GDP." Comment on the accuracy of the previous statement
What will be an ideal response?
"Expansionary fiscal policy is always 100 percent effective when the short-run aggregate supply curve is horizontal." Is this statement TRUE?
A) yes, because theoretically nothing else can offset the effects of fiscal policy B) yes, when the long-run aggregate supply curve is horizontal too C) no, because crowding out could take place D) no, because the increased spending may cause the price level to increase