Classical Growth Theory Argues That, When the Real Wage Rate

question 197

Multiple Choice

Classical growth theory argues that, when the real wage rate rises above the subsistence level,

• A) people don't want to work as much, decreasing labor supply.
• B) technological change slows down, stagnating the economy.
• C) population growth increases, driving the real wage rate back to subsistence level.
• D) the economy enjoys a period of permanent growth.

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Definitions:

Interest Rate

The cost incurred, calculated as a fraction of the principal, for utilizing assets, charged by the lender to the borrower.

Banks

Financial institutions licensed to receive deposits and make loans, and offer various other financial services, such as wealth management and currency exchange.

Profits

The financial gain obtained when the revenues generated from business activities exceed the expenses, taxes, and costs incurred in producing those revenues.

Financial Markets

Marketplaces where individuals and entities can trade financial securities, commodities, and other fungible assets at prices determined by supply and demand.