Lecture 2 Clicker Questions

If F(K, L ) = A K ^α L^ 1 − α is an economy's production function, what is labor's share of output?

1 − α

Technological advances typically have a _____ impact on investment.

positive

The neoclassical theory of distribution combined with the Cobb-Douglas production function suggest a linkage between:

productivity growth and real wages.

The neoclassical theory of distribution suggests that factor demand is based on:

the marginal productivity of that factor

Which is an example of the Cobb-Douglas production function?

F( K, L ) = A K ^α L^ 1 − α

Suppose that each factor of production increases by 10 percent and output subsequently increases by 10 percent. Which phrase describes this situation?

Constant returns to scale

Which is a possible negative result of increased government spending?

Crowding out of investment

Which equation describes the marginal product of a factor (MPi )

F(j, i +1) - (F(j, i)

How do competitive, profit-maximizing firms determine the optimal level of a factor?

The firm demands each factor of production until that factor's marginal product equals its real factor price.

Which variable adjusts to bring the market for goods and services into equilibrium?

The real interest rate