Aggregate Production Function Test
Questions with Passed Solutions!!
basic macro goals: CORRECT ANSWERS 1. economic growth
2. full employment
3. price stability
4. income equality
rule of 70: CORRECT ANSWERS (an approximation)
# of years for a variable to double=70/annual growth rate (in %)
how to find labor productivity: CORRECT ANSWERS Y/L (output/unit of labor)
how to find capital productivity: CORRECT ANSWERS Y/K (output/unit of capital)
relationship between labor and labor productivity: CORRECT ANSWERS as labor
increases, labor productivity decreases (shown on a singular aggregate production
function)
relationship between labor and capital productivity: CORRECT ANSWERS as labor
increases, capital productivity increases
how do you know when labor is increasing on a capital graph? CORRECT ANSWERS if
labor increases on a quantity of capital graph (K on the X axis), the aggregate
production function will shift up. if labor stays constant, there will be no change in the
production function
how do you increase capital stock? CORRECT ANSWERS investment>depreciation
(must increase investment to increase stock)
what happens to wage rate as labor increases? CORRECT ANSWERS wage rate will
decrease
relationship between capital and capital productivity: CORRECT ANSWERS an
increase in capital leads to a decrease in capital productivity
Questions with Passed Solutions!!
basic macro goals: CORRECT ANSWERS 1. economic growth
2. full employment
3. price stability
4. income equality
rule of 70: CORRECT ANSWERS (an approximation)
# of years for a variable to double=70/annual growth rate (in %)
how to find labor productivity: CORRECT ANSWERS Y/L (output/unit of labor)
how to find capital productivity: CORRECT ANSWERS Y/K (output/unit of capital)
relationship between labor and labor productivity: CORRECT ANSWERS as labor
increases, labor productivity decreases (shown on a singular aggregate production
function)
relationship between labor and capital productivity: CORRECT ANSWERS as labor
increases, capital productivity increases
how do you know when labor is increasing on a capital graph? CORRECT ANSWERS if
labor increases on a quantity of capital graph (K on the X axis), the aggregate
production function will shift up. if labor stays constant, there will be no change in the
production function
how do you increase capital stock? CORRECT ANSWERS investment>depreciation
(must increase investment to increase stock)
what happens to wage rate as labor increases? CORRECT ANSWERS wage rate will
decrease
relationship between capital and capital productivity: CORRECT ANSWERS an
increase in capital leads to a decrease in capital productivity
