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Unformatted text preview: 16-1(Key Question)What are the four supply factors of economic growth? What is the demand factor? What is the efficiency factor? Illustrate these factors in terms of the production possibilities curve.The four supply factors are the quantity and quality of natural resources; the quantity and quality of human resources; the stock of capital goods; and the level of technology. The demand factor is the level of purchases needed to maintain full employment. The efficiency factor refers to both productive and allocative efficiency. Figure 16.1 illustrates these growth factors by showing movement from curve AB to curve CD.16-5 (Key Question)Between 1990 and 2005 the U.S. price level rose by about 50 percent while real output increased by about 56 percent. Use the aggregate demand-aggregate supply model to illustrate these outcomes graphically.In the graph shown, both AD and AS expanded over the 1990-2005 period. Because aggregate supply increased as well as aggregate demand, the new equilibrium output rose...
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- Fall '07
- Economics, key question, higher labor productivity