According to the Neoclassical Theory of Distribution, in an Economy

question 34

Multiple Choice

According to the neoclassical theory of distribution, in an economy described by a Cobb-Douglas production function, workers should experience high rates of real wage growth when:

• A) real interest rates are high.
• B) real interest rates are low.
• C) average labor productivity is growing rapidly.
• D) capital's share of income is growing rapidly.

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Definitions:

Consumer Surplus

The variance between the sum consumers are ready and financially able to spend on a product or service and the sum they actually spend.

Excise Tax

A tax levied on specific goods or services, such as alcohol, tobacco, and gasoline.

Elastic Supply

A situation where the quantity supplied of a good changes significantly in response to changes in its price.

Elastic Demand

a situation where the quantity demanded of a good or service significantly changes in response to a change in price.