According to Classical Growth Theory, If Labor Productivity Increases

question 119

Multiple Choice

According to classical growth theory, if labor productivity increases,

• A)the population grows but more slowly than real GDP so that people's incomes are permanently higher.
• B)people save more, which increases the capital per hour even more, and so economic growth continues indefinitely.
• C)the population grows and eventually real GDP returns to the subsistence level.
• D)the pursuit of profit causes further increases in capital per hour and technology and economic growth continues indefinitely.
• E)the growth rate of real GDP per person permanently increases.

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Definitions:

Bad Debt Expense

The cost associated with accounts receivable that a company is not able to collect.

Interest

The cost of borrowing money or the compensation received by lenders, usually expressed as an annual percentage rate.

Maturity Value

The total amount payable to an investor at the end of a fixed-term investment, including the principal and any accrued interest.

Adjusting Entry

An entry made in the accounting records at the end of an accounting period to allocate income and expenses to the period in which they actually occurred.