Using the production function Real GDP = T (L, K), and the LRAS curve, describe the process by which a decline in interest rates impacts the use of capital and economic growth
Lower interest rates will lower the cost of borrowing funds to purchase capital, giving firms an incentive to employ more capital. With more capital employed, the production function would shift upward leading to a higher level of Real GDP. More Real GDP corresponds to a shifting of the LRAS curve rightward (economic growth).
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A widget producer is deciding whether to compensate widget makers on a salary basis or a per unit basis. Given that it is difficult to monitor shirking, which of these pay schedules would provide stronger performance incentives?
a. Per piece compensation b. Salary c. Both of them d. Neither of them
An entrepreneur is best described as
a. someone that is hired to work in a firm b. someone who creates human capital c. someone with the ability to combine other resources in a productive enterprise d. anyone who owns productive enterprise e. anyone who produces long-lived physical capital