If a nation’s productivity grows by 3% rather than 1.5% over many years, what will be the difference in the nation’s standard of living? Explain
Please provide the best answer for the statement.
The answer is based on the rule of 70. A 3% increase in labor productivity means that the standard of living in an economy will double in about 23 years (70/3). An increase in labor productivity that is 1% less, or 1.5%, means that it will take 47 years (70/1.5) for the standard of living to double.
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Second-degree price discrimination generally takes the form of
a. special prices for students and seniors. b. membership clubs. c. quantity discounts. d. "extras" like free delivery and free customer service.
The longer the time horizon of a project, the more important choosing the right discount rate is
a. True b. False
Discuss the dangers of inflation; that is, why may it hurt an economy?
Before the dramatic increase in interest rates, savings and loans were paying a regulated rate on their liabilities (deposits) and earning a higher rate on their assets (mortgages). They had a positive interest rate spread which also gave them a positive net interest margin. Since they were quite confident concerning the cost of funds, they could set mortgage rates that would ensure an adequate spread and margin. Once interest rates began to increase and the rate ceiling on deposits was removed, the interest rate offered to depositors (cost of funds) increased, but because most of the assets of savings and loans were in long-term mortgages, the interest earned on assets was fairly interest rate insensitive.
This quickly put many savings and loans into negative spread and margin positions and contributed to the crisis that was to hit this industry. Indicate whether the statement is true or false.