Suppose depreciation per worker is less than saving per worker. Given this situation, explain what will happen to each of the following variables over time: capital per worker, output per worker, saving per worker, and consumption per worker
What will be an ideal response?
If depreciation is less than saving, it is also less than investment. Alternatively, there is excess investment to offset the amount of capital that wears out. So, the capital stock will increase. This will cause an increase in K/N, Y/N, and S/N. As Y/N rises, so will C/N.
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Is it possible to see gains in a nation's real standard of living without any positive economic growth?
A) No, a nation's standard of living cannot improve without economic growth. B) Yes, but only if the government prints more money so people feel rich. C) Yes, if workers can produce the same level of output in fewer work hours, so that more leisure time could push up the real standard of living. D) None of the above: Economic growth has nothing to do with a nation's standard of living.
When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline