In the absence of technological progress, we know that the level of output per worker in the steady state will
A) increase over time.
B) remain constant.
C) decrease as a result of decreasing returns to scale.
D) increase or decrease, depending on the rate of saving.
E) increase or decrease, depending on the rate of depreciation.
B
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Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and GDP Price Index rises. b. There is not enough information to determine what happens to these two macroeconomic variables. c. The real risk-free interest rate and GDP Price Index remain the same. d. The real risk-free interest rate falls, and GDP Price Index falls. e. The real risk-free interest rate rises, and GDP Price Index falls.
Considering the theory of purchasing power parity, if inflation in Mexico is 5% while prices in the U.S. are stable; we should expect over the period of a year:
A. the dollar to appreciate 5% relative to the peso. B. the peso to appreciate 5% relative to the dollar. C. the real exchange rate of U.S. goods / Mexican goods to appreciate 5%. D. the nominal exchange rate to stay fixed.