ECONOMICS W/CONNECT+20 >C<
20th Edition
ISBN: 9781259714993
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 25, Problem 3RQ
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Evaluate the statement whether it is true or false.
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"Consider the simple production model studied in class, but with different exponents. Suppose that the
production function is Cobb-Douglas. The exponent on capital is 0.1 and the exponent on labor is 0.9. The
data for this economy is A=10, KO=300 and the initial population is LO-30. We will assume that everyone in
this country works so that population equals employment and per-person GDP equals per-worker GDP.
Now suppose that the country receives foreign aid that is used to invest in infrastructure and electric
vehicles. As a result, over the next few years, the economyos capital stock doubles to K1=600. Fortunately,
no one is killed during the hurricane. In the Capital market the Demand will and the Supply will
As a result, the rental rate will
Shift to the Right; Remain unaffected; Increase
Shift to the Left; Remain unaffected; Fall
Shift to the Left; Shift to the Right; Fall
Remain unaffected; Shift to the Right; Fall
If a nation with an aging population admits more low-skilled immigrants:
wealth disparity decreases.
O income disparity increases.
job creation is reduced.
O income mobility is reduced.
Explain why U.S. potential GDP per worker per week is greater than that in Europe.
What could induce Europeans to work the same hours as Americans and would that close the gap between potential GDP per worker in the two economies?
U.S. potential GDP per worker per week is greater than that in Europe because
O A. U.S. workers work fewer hours on average but they are more productive than Europeans
O B. U.S. workers are more productive per hour of work and they work longer hours than Europeans
C. the supply of labor in America is smaller than the supply of labor in Europe
O D. the United States uses less capital but they use it more effectively
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Chapter 25 Solutions
ECONOMICS W/CONNECT+20 >C<
Knowledge Booster
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- In PPP terms, GDP per capita in Country A is 3 times higher than in dollar terms. This means that if a US firm employs workers in Country A at $5 per hour, this would give the the workers in Country A a purchasing power equivalent to a wage of $15 per hour in the USA. Select one: O True O Falsearrow_forward"Consider the simple production model studied in class, but with different exponents. Suppose that the production function is Cobb-Douglas. The exponent on capital is 0.1 and the exponent on labor is 0.9. The data for this economy is A=10, K0-300 and the initial population is LO-30. We will assume that everyone in this country works so that population equals employment and per-person GDP equals per-worker GDP. Now suppose that the country receives foreign aid that is used to invest in infrastructure and electric vehicles. As a result, over the next few years, the economyos capital stock doubles to K1=600. Fortunately, no one is killed during the hurricane. In the initial final equilibrium, per-worker GDP will be..." Between 12.3% and 14.4% higher than in the initial equilibrium. Between 7.0% and 8.0% higher than in the initial equilibrium. Between 4.4% and 6.6% lower than in the initial equilibrium. None of the above.arrow_forwardSuppose that the share of population employed in Country B is 60 percent, and that Countries B and D have the same real GDP per capita. Based on the information in the table, what share of Country D's population must be employed? Country Population (millions) Average Labor Productivity ($) 2,000 A B с O E Select one: a. 24 percent O b. 12 percent O c. 8.3 percent O d. 83.3 percent 100 150 75 250 95 10,000 25,000 50,000 60,000arrow_forward
- Beginning about 1985, many developing countries, dissatisfied with the results of import-substitution policies, greatly reduced rates of protection for manufacturing. As a result, developing-country trade rapidly, and the share of manufactured goods The results of this policy change , in terms of sustainable economic growth, have been mixed at best. O decreased, decreased O decreased, remained stable O increased, decreased O increased, increasedarrow_forwardSuppose population growth is given by L, = L(1+7)', where Lo is the population today, L, is the population in t periods, and A is the population constant growth rate. If we do not know what value n takes but do know the values of Lo, L, and t, we can calculate 7 by punching into our calculators. Select one: a. ñ = (L/Lo)" b.n = [(L, - 1)/Lo]" O d.n = (L,ILOY - 1 e.ñ = (LILo) -1arrow_forwardOn your diagram, illustrate and explain how the wage increase can lead them to have: more consumption and more free time • more consumption and less free time • less consumption and more free time this is the diagram, are you able to make a copy of that and illustrate the answer ¥50 650 600 SS-O 480 400 350 -300 250 200 150. SO 1-720 360 240 1 2 1 4 T 6 8 S C c=200214-4) A 10 ( 12 1 14 BC=30(24-1) 1 1 16 18 4C2 IC₂ 20 22 24 slope-20arrow_forward
- 3. Suppose that there are two countries with dif- ferent levels of total factor productivity, and that these differences exist because of barriers to technology adoption in the low-productivity country. Also suppose that these two countries do not trade with each other. Now, suppose that residents of each country were free to live in either country. What would happen, and what conclusions do you draw from this?arrow_forwardWhat is the impact on the labour market due to the arrival of a boatload of Haitian migrants? Select one: O a. labour demand shifts to the left; wage rate decreases and level of employment decreases O b. labour supply shifts to the right; wage rate decreases and level of employment is higher O. labour demand shifts to the right; wage rate increases and level of employment increases O d. labour supply shifts to the left; wage rate increases and level of employment is lowerarrow_forwardA software company in Silicon Valley uses programmers (labor) and computers (capital) to produce apps for mobile devices. The firm estimates that when it comes to labor, MPL = 5 apps per month while PL = $1,000 per month. And when it comes to capital, MPC = 8 apps per month while PC = $1,000 per month. If the company wants to maximize its profits, it should: LO16.5 a. Increase labor while decreasing capital. b. Decrease labor while increasing capital. c. Keep the current amounts of capital and labor just as they are. d. None of the above.arrow_forward
- Consider two countries, labeled 1 and 2. Each has the production function Y =A;K/3L2/3 i= 1, 2. If the only difference between the two countries is that A1>A2. O A. Country 2 will not produce anything, ceteris paribus. B. Country 2 will produce more than Country 1, ceteris paribus. O. Country 1 will produce more than Country 2, ceteris paribus. D. each will produce the same amount, ceteris paribus. O E. Not enough information is given.arrow_forwardQuestion I - Solow Model without Population or Technology Growth Consider the Solow growth model with no population growth and no technology growth, i.e., n = x = 0. Output is created by a Cobb-Douglas production function combining Labor, Lt, and capital, Kt, such that output Yt is given by Y₁ = A+ KL 1-α = = Recall that, without population growth, Lt Lo and assume that Lo 1. Furthermore, recall that, without technology growth, At Ao and assume that A0 = 1. The law of motion for capital per worker is = kt+1 = (1 − 6) kt + sAtko. (1) Assume that the savings rate is s = 0.2, the depreciation rate is 8 = 0.1, and that the capital share is a = 0.3. 1. Use equation (1) to solve for the steady state level of capital, kss, (hint, replace kss in that equation on both sides) kss = What is the steady state level of capital? (Replace the numbers in the expression) = 2. Suppose that this economy starts with ko 1. Does capital grow or fall over time? What is the maximum level of capital per capita…arrow_forward2 Explain why the Least Industrialized Nations have so manychildren, consequences of rapid population growth, populationpyramids, the three demographic variables, and problems inforecasting population growtharrow_forward
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