In the Harrod-Domar model, if the savings rate is 20% and the incremental capital output ratio is five, abstracting from depreciation, what is the implied growth rate?
What will be an ideal response?
4%.
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
A manager invests $20,000 in equipment that would help the company reduce it's per unit costs from $15 to $12 . He expects the equipment to be in use for the next seven years. After two years, he realizes that if he outsourced the production, the unit cost would be $7 instead. At this point what should the senior manager do?
a. Charge the manager for the next five years of depreciation b. Write off the equipment as sunk cost and allow for outsourcing since it is cheaper c. Not allow for outsourcing since the equipment is good for another five years d. None of the above
Where does the money for investment in physical capital come from? It largely comes from:
A. the savings of ordinary households. B. government subsidies. C. the reinvestment of funds from businesses. D. donation by foreign countries.
A price ceiling is
A. a minimum price set by government that sellers may charge for a good. B. the minimum price that consumers are willing to pay for a good. C. the difference between the initial equilibrium price and the equilibrium price after a decrease in supply. D. a maximum price set by government that sellers may charge for a good.