PS3_Ans1 - *For advance discussion updated explanation...

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Assessment 3 (with updated explanations on Q5!!!) 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 UPDATED!!! (D) does not bring obvious results to budget position (at your level of understanding).
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Unformatted text preview: (*For advance discussion: updated explanation provided by Dr. Luo lowering interest rates have complicated effects on the gov's budget. It would increase consumption and investment, which increases gov revenues from income taxes. However, it would reduce gov revenues from taxing interest revenues. The net effect of lowering interest rates on gov's budget is not clear.) 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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