Exam 3: Aggregate Production and Productivity

Assume that an economy is in equilibrium when there occurs an increase in the supply of capital.The available quantity of labor remains fixed.Once the economy has adjusted to its new equilibrium,which of the following has increased?

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(Multiple Choice)

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Question 1

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Suppose a government tried to mandate a real wage above the equilibrium real wage.Assuming that factor markets are otherwise free and competitive,explain why the higher real wage would fail to increase the share of labor income in national income.

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Question 2

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Given the Cobb-Douglas production function,the marginal product of labor is ,and the marginal product of capital is .If each factor's price is equal to its marginal product,then its share of total income equals its exponent in the production function;0.7 for labor,and 0.3 for capital.Firms will respond to the mandated higher real wage by reducing the quantity of labor demanded until the marginal product of labor is equal to the real wage.Workers who still have a job will have higher income,but many workers now have no job and no income.The reduced labor input lowers the marginal product of capital.Since the rental price of capital is unregulated,it will fall,so that no capital becomes idle.Since the prices of both labor and capital are equal to their respective marginal products,their shares of the reduced total output are unchanged.

The classical framework is based on which of the following assumptions?

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Question 3

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Profit maximization implies that firms will want to ________.

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Question 4

What does the Cobb-Douglas production function assume about the input shares in the economy?

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Question 5

Profit maximization implies that firms will want to ________.

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Question 6

An economy's production function is Y = A ,and the economy's total output in equilibrium is $90 billion.Total capital income in this economy is ________.

(Multiple Choice)

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Question 7

The marginal product of labor (MPL)is given by the ________.

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Question 8

From the Cobb-Douglas production function we learn that there are two sources that help explain cross-country differences in per capita income: and .

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Question 9

Use the Cobb-Douglas production function to explain why even massive movements of labor and capital across national borders may have little impact on differences in per capita income.

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Question 10

Economic profits differ from accounting profits because ________.

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Question 11

Equilibrium market prices for capital and labor are $10 and $8,respectively.Then,the economy experiences one or more supply shocks,so that the marginal product of capital is $9,and the marginal product of labor is $6.Assuming that the available quantities of capital and labor are fixed,which of the following is (are)likely to decrease as the economy approaches its new equilibrium?

(Multiple Choice)

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Question 12

Real capital income is given by ________.

(Multiple Choice)

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Question 13

Which of the following is (are)likely to cause the marginal product of an input to decrease?

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Question 14

Assume that an economy is in equilibrium when technological progress causes an increase in total factor productivity.Once the economy has adjusted to its new equilibrium,and assuming that the supplies of capital and labor remain unchanged,which of the following has increased?

(Multiple Choice)

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Question 15

Key determinants of economic profit include ________.

(Multiple Choice)

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Question 16

Firms will continue to increase their purchase of factor inputs as long as ________.

(Multiple Choice)

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Question 17

Suppose that a technological advance raises total factor productivity.Explain,step-by-step,how the economy adjusts to arrive at a new long-run equilibrium.

(Essay)

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Question 18

What do you think would be the Cobb-Douglas single best prescription for poor countries to catch up with the rich?

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Question 19

The marginal product of capital (MPK)is given by the ________.

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Question 20

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Exam 3: Aggregate Production and Productivity

Assume that an economy is in equilibrium when there occurs an increase in the supply of capital.The available quantity of labor remains fixed.Once the economy has adjusted to its new equilibrium,which of the following has increased?

Suppose a government tried to mandate a real wage above the equilibrium real wage.Assuming that factor markets are otherwise free and competitive,explain why the higher real wage would fail to increase the share of labor income in national income.

The classical framework is based on which of the following assumptions?

Profit maximization implies that firms will want to ________.

What does the Cobb-Douglas production function assume about the input shares in the economy?

Profit maximization implies that firms will want to ________.

An economy's production function is Y = A ,and the economy's total output in equilibrium is $90 billion.Total capital income in this economy is ________.

The marginal product of labor (MPL)is given by the ________.

From the Cobb-Douglas production function we learn that there are two sources that help explain cross-country differences in per capita income: ________ and ________.

Use the Cobb-Douglas production function to explain why even massive movements of labor and capital across national borders may have little impact on differences in per capita income.

Economic profits differ from accounting profits because ________.

Real capital income is given by ________.

Which of the following is (are)likely to cause the marginal product of an input to decrease?

Assume that an economy is in equilibrium when technological progress causes an increase in total factor productivity.Once the economy has adjusted to its new equilibrium,and assuming that the supplies of capital and labor remain unchanged,which of the following has increased?

Key determinants of economic profit include ________.

Firms will continue to increase their purchase of factor inputs as long as ________.

Suppose that a technological advance raises total factor productivity.Explain,step-by-step,how the economy adjusts to arrive at a new long-run equilibrium.

What do you think would be the Cobb-Douglas single best prescription for poor countries to catch up with the rich?

The marginal product of capital (MPK)is given by the ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

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From the Cobb-Douglas production function we learn that there are two sources that help explain cross-country differences in per capita income: and .