Paul Romer's theory of economic growth differs from traditional theories in that
A) Romer argues an investment-knowledge cycle can exist, but requires constant increases in investment rates, while traditional theories argue that investment rates can be constant.
B) Romer argues that investment in human capital always occurs before investment in physical capital, while traditional theories emphasize the priority of physical capital.
C) Romer argues an investment-knowledge cycle allows a one-time increase in investment to permanently increase a country's growth rate, while traditional theory argued such an investment would have only a short-term effect.
D) Romer argues that investment in capital goods is not important in encouraging growth while investment in human capital is, whereas traditional theorists emphasize both human and physical capital.
C
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The demand for Country X's most important exportable product- electronic goods- is likely to double in the next 5 years. Which of the following is likely to happen in this case?
A) Consumption in Country X will rise. B) Asset prices in Country X will fall. C) Unemployment rate in Country X will rise. D) Investment in Country X will fall.
An adverse supply shock with a vertical supply of labor curve will
A) raise the price level and leave unemployment unchanged. B) raise unemployment and lower the price level. C) raise both unemployment and the price level. D) lower both unemployment and the price level.