If the price of airline travel in Mexico falls, and the demand for train travel in Mexico also falls, then the two goods are
A. normal goods.
B. inferior goods.
C. substitutes.
D. complements.
Answer: C
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One of the central predictions of neo-classical macroeconomic growth theory is that an increase in the growth rate of the population causes at first a decline the growth rate of real output per capita,
but that subsequently the growth rate returns to its natural level, itself determined by the rate of technological innovation. The intuition is that, if the growth rate of the workforce increases, then more has to be saved to provide the new workers with physical capital. However, accumulating capital takes time, so that output per capita falls in the short run. Under the assumption that population growth is exogenous, a number of regressions of the growth rate of output per capita on current and lagged population growth were performed, as reported below. (A constant was included in the regressions but is not reported. HAC standard errors are in brackets. BIC is listed at the bottom of the table). Regression of Growth Rate of Real Per-Capita GDP on Lags of Population Growth, United States, 1825-2000 (1) (2) (3) (4) (5) Lag number Dynamic multipliers Dynamic multipliers Dynamic multipliers Dynamic multipliers Dynamic multipliers 0 -0.9 (1.3) -1.1 (1.3) -1.3 (1.7) -0.2 (1.7) -2.0 (1.5) 1 3.5 (1.6) 3.2 (1.6) 1.8 (1.6) 0.8 (1.5) - 2 -1.3 (1.7) -3.0 (1.6) -2.2 (1.4) - - 3 0.2 (1.7) 1.5 (1.2) - - - 4 -2.0 (1.5) - - - - BIC -234.4 -236.1 -238.5 -240.0 -241.8 (a) Which of these models is favored by the information criterion? (b) How consistent are these estimates with the theory? Is this a fair test of the theory? Why or why not? (c) Can you think of any improved data to test the theory? What will be an ideal response?
A decline in demand in a competitive industry will result in
a. a decrease in equilibrium price b. a decline in the number of firms in the industry c. economic losses for some firms in the industry d. a decline in the equilibrium quantity e. all of the above
Information problems create inefficient outcomes in:
A)both the private and the public sectors. B) the private sector but not the public sector. C) the public sector but not the private sector. D) neither the private nor the public sector.
A technological change that increases productivity ________ marginal product and ________ marginal cost
A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases