With an increase in total factor productivity in the Solow growth model,
A) output decreases temporarily and returns to the previous steady state.
B) output increases temporarily and returns to the previous steady state.
C) the economy reaches a steady state with higher output.
D) the economy reaches a steady state with lower output.
C
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The law of diminishing marginal product shows the relationship
A) between accounting and economic profits. B) between short-run and long-run outputs of a firm. C) between inputs and outputs for a firm in the short run. D) between inputs and outputs for a firm in the long run.
If at the prevailing interest rate the quantity of money demanded is $2 trillion, and the supply of money is $1.5 trillion, then which of the following is true?
A. There is a shortage of money, and consequently interest rates must fall in order to achieve an equilibrium in the money market. B. There is a surplus of money, and consequently interest rates must fall in order to achieve an equilibrium in the money market. C. There is shortage of money, and consequently interest rates must rise in order to achieve an equilibrium in the money market. D. There is a surplus of money, and consequently interest rates must rise in order to achieve an equilibrium in the money market.