1. If increasing returns to scale exist, then an increase in all inputs of 5 per

Question

1. If increasing returns to scale exist, then an increase in all inputs of 5 percent should: A. not affect output B. should increase output by less than 5 percent. C. should increase output by 5 percent. D. should increase output by more than 5 percent.

2. If the economy were producing at its potential output, then the unemployment rate and capacity utilization rate would most likely be at their target rates.

True
False

3. If the CPI increased from 87 to 95, the rate of inflation during that period is:

4. The crucial factor in the Classical Growth Model is the:

quantity of entrepreneurs.

5. Incentives for growth in an economy are generally greater when resources are privately owned.

True
False

6. The U.S. Department of Commerce defines an economic expansion as:

A. 5% B. 6.5% C. 8.5% D. 9.2

Explanation / Answer

1. Should increase output by more than 5%

2. True

3. Inflation rate = (95-87)*100/87 = 9.2%

4. Although all the three factors are important to the classical growth model, quantity of labor is more important

5. True

6.

A. an increase in real economic output recorded for two consecutive quarters in a year.

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