How will an increase in physical capital affect labor productivity, labor demand, and potential GDP?

What will be an ideal response?


An increase in capital increases labor productivity. It shifts the production function upward and, because productivity has increased, it increases the demand for labor. Equilibrium employment increases because of the increase in demand for labor. Potential GDP increases because employment increases and because the production function has shifted upward.

Economics

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When the aggregate expenditures function of a closed economy is plotted against real GDP, any point on the 45-degree line represents C + I + G = Y, where C = Consumption, I = Investment, G = Government spending, and Y = Real GDP

a. True b. False Indicate whether the statement is true or false

Economics

Under the system of fractional reserve banking, the reserve requirement is the ratio of excess reserves to total reserves

a. True b. False Indicate whether the statement is true or false

Economics

Which of the following statements best describes the U.S. budget scenario from World War II until about 1980?

a. During this period, the United States ran budget deficits almost every year, but the percentage increases in debt were smaller than the percentage growth of GDP, so the debt/GDP ratio declined. b. During this period, the United States ran budget deficits almost every year, but the percentage increases in debt were larger than the percentage growth of GDP, so the debt/GDP ratio increased. c. During this period, the United States ran budget deficits almost every year, the percentage increases in debt were larger than the percentage growth of GDP, yet the debt/GDP ratio declined. d. During this period, the United States ran budget deficits almost every year, the percentage increases in debt were smaller than the percentage growth of GDP, yet the debt/GDP ratio increased.

Economics

Which economist developed the concept of the invisible hand?

a. John Maynard Keynes b. Adam Smith c. Karl Marx d. Milton Friedman

Economics