econ quiz 2 - Sarah Anderson Econ Quiz 2 6.a) What is meant...

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Sarah Anderson Econ Quiz 2 6.a) What is meant by"national savings" and what is it's relationship to investment? b)In this context, why might someone be concerned about the macro effects of persistent government budget deficits? National savings are two parts. First, it is disposable income which does not use for consumption. Second, it is the budget surplus. It's true that in equilibrium saving=investment. The budget deficits might help to bring the economy on track during recession. But it also shows structural problem of the economy, such as over consumption,over imports, lower competitiveness etc. It might affect the credit rating and the value of currency. It might be attacked by speculants. And printing new money to spend might bring hyper-inflation, and debts that our kids have to pay back. Briefly explain the economic incentives which lead entrepreneurs to accept the risks and costs of innovation. There are no standard economic incentives that inspire entrepreneurs to undertake risk. It's a personality trait and it's what make entrepreneurs what they are rather than labor. Explain the relationship between labor productivity and real wages.? In a competitive free market in the long run as they are in direct correlation. Because employers have to bid for employees, as their productivity goes up they have to raise wages. Another way to look at it is because the labor productivity goes up, so does an employers demand for that labor. Given that the supply curve of that labor remains the same, price will go up due to supply and demand. Regardless of whether any individual employer wants to pay more. Labor productivity and total compensation -- real wages plus benefits -- roughly correspond, although
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This note was uploaded on 05/11/2011 for the course ECON 2000 taught by Professor Paulkivi during the Spring '11 term at Bemidji State.

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econ quiz 2 - Sarah Anderson Econ Quiz 2 6.a) What is meant...

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