PS3_Ans - (*For advance discussion: In expansionary...

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Assessment 3 1 A 2 D 3 A 4 A 5 A 6 C 7 A 8 A 9 D 10 D Suggested explanations to selected questions: Q1 Income may be inferred as ‘nominal income’. Increases in nominal income can be a mere result of inflation, so real income (which measures standard of living) might not increase. Q2 Apply the ‘rule of 70’ here. Q3 As in chapter 10, quantity of capital per hour worked is one of the determinant to labor productivity. Q5 (D) does not bring obvious results to budget position (at your level of understanding).
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Unformatted text preview: (*For advance discussion: In expansionary monetary policies, a lower interest rate (chosen by the Fed) will encourage investments and lead to higher real GDP for the economy. Thus, if we assume a proportionate income tax, the higher income will increase Gov’t tax revenue. Thus, it will improve the Govt’s budget position.) Q7 Gov’t budget surplus represents an increase in public savings, which in turn implies an rightward shift of the supply curve for loanable funds....
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This note was uploaded on 04/22/2010 for the course ECONOMICS ECON1002 taught by Professor None during the Spring '10 term at Hong Kong Institute of Vocational Education.

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