Category: Economics

Question 51 ptsWhat do we call the return to specialized inputs a firm receives above what they paid for those inputs?Economic rentsProducer surplusProfitMarginal profit

Net domestic product is a ____ measure of output than gross domestic product because it ____ for depreciation.
(a) worse; includes
(b) worse; excludes
(c) better; includes
(d) better; excludes

➤ Is population income a determinant of supply or demand?
Income primarily shifts the demand curve because it changes consumers’ purchasing power. Higher incomes increase demand for normal goods, raising equilibrium price and quantity. Income does not directly alter firms’ production decisions; supply responds indirectly only through capacity expansion or new entry if income trends consistently change market demand.

➤ Why does national saving matter for investment and growth?
National saving supplies funds for investment, which builds capital and raises productivity. In a closed economy, saving equals investment (S = I), so higher national saving supports more capital accumulation and faster long-run growth. Low saving can raise interest rates, limit investment, and slow productivity improvements.

Question 12QQ01) The average annual growth rate of per capita GDP in the United States from 1870 to 2018 is
a. 0 percent.
b. 2 percent.
c. 10 percent.
d. 5 percent.

➤ Why might private investment rise or fall after the spending reduction?
Lower government borrowing pressure tends to push interest rates down, which encourages private investment through the crowding-in effect. However, reduced demand and weaker sales can dampen firms’ incentives to invest. Net investment rises only if the interest-rate stimulus outweighs the loss in expected profits and capacity utilization.