If a Larger Share of National Output Is Devoted to Investment

question 14

Multiple Choice

If a larger share of national output is devoted to investment, starting from an initial steady-state capital stock below the Golden Rule level, then productivity growth will:

• A) increase in the short run but not in the long run.
• B) increase in the long run but not in the short run.
• C) increase in both the short run and the long run.
• D) not increase in either the short run or the long run.

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Definitions:

FOB

Free On Board; a term in international commercial law specifying at what point the risk of loss shifts from the seller to the buyer.

Trade-In Allowance

The amount credited to the buyer by the seller when the buyer gives a previously owned product as part of the payment for a new product.

Price Reduction

A decrease in the price of a product or service, often to attract more customers or respond to market conditions.

Used Product

A term referring to items that have been previously owned and utilized by one or more persons before being sold or given to a new owner.