When a low-income nation improves its institutions, so that growth results, one reason the growth may be more rapid than would result from a similar improvement in a developed nation that brings the same amount of added capital per worker to each nation, is that
a. adding capital has constant returns to scale, rather than diminishing returns, in each nation.
b. with diminishing returns to scale, and with richer nations starting with more capital per unit labor, the added capital produces smaller increments to production in the higher-income nations.
c. wage rates are lower in the low-income nation, and lower-income workers are more productive.
d. capital is always more productive in lower-income nations.
B
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a. Straining the insurance system b. Creating healthcare exchanges c. Mandating insurance premiums d. Increasing government regulation
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