The immediate effect of increased population growth, with real GDP growth unchanged, is to
A. increase economic growth by stimulating more saving.
B. leave economic growth unchanged.
C. reduce economic growth by reducing per capita real GDP.
D. increase economic growth by boosting the capital stock.
Answer: C
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The accelerator theory can explain the paradox that both interest rates and investment rise and fall in concert during the business cycle if
A) the effect of changes in Y effect on In dominate the effect of interest rates on investment. B) the LM curve is constant. C) the IS curve is constant. D) the effect of changes in interest rates on In dominate the effect of changes in Y on In.
The shortsightedness effect suggests that
a. politicians have a strong incentive to support projects that yield immediate and easily recognized benefits, especially when the costs of the projects are difficult to identify and are observable only in the distant future. b. politicians have a strong incentive to support projects that yield benefits in the distant future, especially when the costs of the project must be paid for in the current period. c. voters will tend to weigh future costs and benefits more heavily than current costs and benefits. d. legislators will be unwilling to trade votes on issues, especially when those issues benefit only special interest groups.
Dollarization refers to:
a. increased trade with the United States, resulting in a glut of dollars circulating in the domestic economy b. the fall of the U.S. dollar. c. the dominance of the U.S. dollar in international finance. d. the adoption of any foreign currency as an official currency by nations outside the United States, such as El Salvador and Ecuador.
Futures markets and derivatives contribute to economic growth by:
A. increasing the risk-taking capacity of the economy. B. deterring the transfer of risk. C. decreasing speculation. D. forcing people to accept the risk their decisions create.