What causes capital and labor shares of gross domestic product to remain consistent over the years?

What will be an ideal response?


Economic forces keep the labor and capital shares of income almost perfectly constant. Here is an example of how these forces work. Suppose that capital started to become scarce relative to the amount of labor and the capital share of income consequently began to decline. The growing scarcity of capital would cause capital's value to grow, leading to higher payments to each unit of capital and greater subsequent investment in capital. Both of these mechanisms would offset the decline in the capital share of income. Forces like this prevent the capital and labor shares of income from moving around very much.

Economics

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In the circular flow model, which of the following owns the factors of production?

A) only federal, state, and local governments B) only households C) only firms D) both firms and households E) firms, households, and all levels of government

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Including investment and production in the two-good, two-period model with trade

A) allows the country to equalize absorption and output demand. B) renders terms of trade endogenous. C) allows the country to react to changes in the interest rate. D) allows the government to run budget deficits.

Economics

In game theory analysis, what is a "dominant strategy"?

What will be an ideal response?

Economics

An increase in demand for chocolate chips would usually result in a(n)

a. higher equilibrium price and a lower equilibrium quantity b. lower equilibrium price and a lower equilibrium quantity c. lower equilibrium price and a higher equilibrium quantity d. higher equilibrium price and a higher equilibrium quantity e. increase in the supply of chocolate chips

Economics