Suppose the President asks you to write him a letter suggesting ways the government might help the economy achieve permanently higher rates of economic growth
Based on your understanding of growth theory and growth accounting, what would you suggest?
According to both neoclassical and new growth theories, the key to faster growth is generating higher rates of technological progress. Because many technological advances are embodied in new capital, sustaining a high rate of saving and investment is important. Government might help stimulate saving supply by tax incentives such as IRAs and stimulate investment demand by offering investment tax credits, accelerated depreciation and reductions in corporate profit tax rates. New ideas are also embodied in human capital. Government can finance education and training directly and provide low-interest loans to students and training tax credits to businesses. Finally, we need to generate more new ideas, by stimulating research and development efforts. This includes government funding of basic research and tax credits to businesses for R&D expenses.
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When Del Monte, an American company, purchases Mexican tomatoes, Del Monte pays for the tomatoes with
A) Mexican goods and services. B) euros. C) gold. D) Mexican pesos. E) Canadian dollars.
The United States can use all its resources to produce 250 DVDs or 500 shoes. China can use all of its resources to produce 30 DVDs or 300 shoes. The opportunity cost of producing a DVD in the United States is
A) 500 shoes. B) 1 DVD. C) 1/2 of a shoe. D) 20 shoes. E) 2 shoes.