Suppose There Are Constant Returns to Scale

question 147

Multiple Choice

Suppose there are constant returns to scale.Now suppose that over time a country doubles its workers,its natural resources,and its human capital,but its technology is unchanged.Which of the following would double?

• A)both output and productivity
• B)output, but not productivity
• C)productivity, but not output
• D)neither productivity nor output

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Definitions:

Inflationary Gap

A situation where aggregate demand in an economy outpaces aggregate supply, leading to inflation and a potential overheating of the economy.

Federal Budget Deficit

A federal budget deficit occurs when a government's expenditures exceed its revenues within a given fiscal year, leading to the need for borrowing.

Fiscal Policy Measures

Actions by the government that include implementing taxes and allocating funds to impact economic conditions.

Inflationary Gap

The difference between the actual level of GDP and the potential GDP under full employment, indicating excess demand in the economy.