Suppose the capital stock increases by 10% and the number of employed workers increases by 5%. Given this information, explain what will happen to output and to output per worker
What will be an ideal response?
The level of output will obviously increase because the amount of inputs has increased. Given that the capital stock increases by an amount greater than the amount of workers, we know that the capital labor ratio has increased. This implies that output per worker has also increased.
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Keynesians believe that to help ensure full employment production, we should use
A) both counter-cyclical monetary and fiscal policy. B) a money supply rule and counter-cyclical fiscal policy. C) counter-cyclical fiscal policy only. D) counter-cyclical monetary policy only.
Most economists believe that there are positive externalities in education. One can conclude that a free market would fail to give the socially optimal outcome because the equilibrium:
a. price and quantity would be too high. b. price would be too low and quantity would be too high. c. price and quantity would be too low. d. price would be too high and quantity would be too low. e. price and quantity would be just right.
Suppose that the rate of interest increases. What will happen to the discounted present value of an investment?
a. It will increase. b. It will decrease. c. It will remain unchanged. d. It depends on the magnitude of the change.
Other things the same, if there is an increase in the money supply growth rate that is larger than expected, then in the short run
a. the natural rate of unemployment rises. b. the natural rate of unemployment falls. c. the unemployment rate will be above its natural rate. d. the unemployment rate will be below its natural rate.