- Economics To find CPI first find the cost of the basket and then divide them Base year CPI is 100 Inflation 120-100 100 Chapter 7 and 8 Overview

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Economics 9-3-2007 To find CPI: first find the cost of the basket, and then divide them. Base year CPI is 100. Inflation: 120-100 / 100. Chapter 7 and 8 Overview: 1. On average in the long run, all resources including labor will be fully employed. a. Labor and Capital- L and K i. Y=F(K*L), Y=Yf, as L=Lf 2. If : Yf= C+I+G, what assures all of output is purchased at full employment. 3. What determines how output is distributed over consumption and investment? a. Answer: The rate of interest. If output is at full employment, how can output grow? Must get more capital and more labor. Chapter 8: Long run growth 1. An economy can grow by accumulating more inputs, capital and labor, and by improvements in technology. 2. Output per capita grows increases through: a. The accumulation of capital per unit of labor. b. Improvements in technology. Chapter 7: The Classical Long Run Model: The Classical Long Run Model: - Prices and Wages are flexible, and all markets clear. Equilibrium employment and output
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This note was uploaded on 03/18/2008 for the course ECON 2006 taught by Professor Rdcothren during the Fall '08 term at Virginia Tech.

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- Economics To find CPI first find the cost of the basket and then divide them Base year CPI is 100 Inflation 120-100 100 Chapter 7 and 8 Overview

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