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Unformatted text preview: Chapter 21 - Homework Suggested Solutions Problem 15: a. An economy that produces more capital goods than consumer goods (point A on Graph A below) will grow more in the future as reflected by the shifting out of the production possibilities frontier from CI to C ′ I ′ . b. If a point (B in Graph B) had been chosen that produced more consumption goods and thus less capital goods than point A in Graph A, this country would not have experienced as much future growth. The production possibilities curve would only have shifted out a little, to I " C " . Problem 16: Over long periods, small differences in productivity growth rates have significant impacts on the economy’s ability to produce and, therefore, on the standard of living. The following table shows that a 1 percent growth rate in the productivity of labor causes the value of the output per worker to rise from $100 to $122 in 20 years. However, if the growth rate of output is 2 percent, the increase in the value of the productivity of the worker is much larger, rising from $100 to...
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- Summer '08
- Economics, gross domestic product, unemployment rates, percent growth rate