What is the main difference between classical economists' ideas about economic growth versus what modern evidence suggests?
What will be an ideal response?
Classical economists assumed that as real GDP per person rises, the population growth rate increased. But, contrary to this assumption, the data show that population growth rate is approximately independent of the economic growth rate. Classical economists concluded that the increase in population, which increases labor supply, would drive real GDP per person back to the subsistence level. But the data show that in advanced nations real GDP per person is well above the subsistence wage rate.
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If the quantity of money demanded exceeds the quantity of money supplied, then the
A) equilibrium interest rate will decrease. B) equilibrium interest rate will increase. C) equilibrium interest rate stays the same. D) effect on the equilibrium interest rate is indeterminate.
In the above figure, a price floor of $4
A) leads to a shortage. B) leads to a surplus. C) has no effect. D) shifts the demand curve leftward.
If net exports are equal to net foreign investment, which of the following is not true?
A) The balance on the financial account is zero. B) The current account balance is equal to the negative of the financial account balance. C) Net capital inflows are equal to imports minus exports. D) The balance of payments is zero.
If population growth is greater than the growth of real output
A) real per capita Gross Domestic Product (GDP) growth will be less than the growth of real Gross Domestic Product (GDP). B) the production possibilities curve is shifting to the left. C) real per capita Gross Domestic Product (GDP) growth will be greater than the growth of real Gross Domestic Product (GDP). D) real per capita Gross Domestic Product (GDP) and real Gross Domestic Product (GDP) will be growing at the same rate.