How does the new growth theory explain economic growth?
What will be an ideal response?
The new growth theory explains growth as the result of choices made in the pursuit of profit. If people choose to look intensively for new technologies they will be found more quickly. Profit is the motive to look for technological change. The reason is that competition squeezes profits. Firms are constantly looking for ways to reduce costs and increase profits through technological change. The economy can grow forever as long as people make the choices that encourage the search for new technologies.
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Use a supply and demand graph to explain why the rent on land is demand determined
What will be an ideal response?
Bank runs
a. will affect neither the money supply nor the money multiplier. b. increase the money supply. c. can be neither prevented nor mitigated by the Federal Reserve. d. are a problem because banks only hold a fraction of deposits as reserves.