Explain how a well-functioning financial system can increase total factor productivity and promote economic growth
What will be an ideal response?
The financial system can influence the efficiency of the economy, which means it can influence total factor productivity. Financial systems match borrowers with lenders and therefore help allocate resources in an economy. By allocating funds to the individuals who are willing to pay the most to obtain the funds, which generally means their investment projects have the best likelihood for success, a good financial system ensures that resources flow to their most productive uses which increases total factor productivity. This results in increased labor productivity and a higher standard of living.
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How can technology help mitigate the effects of climate change?
What will be an ideal response?
In the four-part diagram used to construct the IS curve, a decrease in the interest rate causes
A) an increase in Ap and induced saving but does not shift the IS curve. B) an increase in Ap and induced saving and shifts the IS curve to the right. C) a decrease in Ap, an increase in induced saving, and shifts the IS curve to the right. D) a decrease in Ap and a decrease in induced saving, but does not shift the IS curve.