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Unformatted text preview: er who earned a salary of $100,000 in 1993. What is the value, in 2012 dollars, of that salary of $100,000 earned in 1993? b. Consider next a worker who earned a salary of $200,000 in 2012. Who earned more, after adjusting for inflation: the worker who earned $100,000 in 1993 or the worker who earned $200,000 in 2012? 4 9. Macroeconomists use the story of Robinson Crusoe to identify the determinants of productivity and living standards, both for Crusoe stranded alone on his deserted island and for all of us in the United States today. a. When macroeconomists observe that how many fish Crusoe can catch depends partly on how good he is at inventing new techniques for fishing, what determinant of productivity in the US economy do they have in mind? b. When macroeconomists observe that how many fish Crusoe can catch depends partly on how many fishing poles he has, what determinant of productivity in the US economy do they have in mind? c. When macroeconomists observe that how many fish Crusoe can catch depends partly on how plentiful fish are in the waters around his island, what determinant of productivity in the US economy do they have in mind? d. When macroeconomists observe that how many fish Crusoe can catch depends partly on how much training in fishing he has, what determinant of productivity in the US economy do they have in mind? 10. Please indicate whether each of the following statements is true or false (circle one on the answer sheet): a. When macroeconomists speak of the “catch-­‐up effect,” they are referring to the idea that if all economy-­‐wide inputs to production are doubled, while holding the stock of technological knowledge fixed, then real GDP should double as well. b. Foreign direct investment occurs in a country when foreigners lend money to businesses in that country, which the businesses then use to acquire physical capital. c. Human capital accumulation requires workers in an economy to accept what economists call an “intertemporal trade-­‐off,” in that they must be willing to accept lower wages or perhaps even no wages at all while they are enrolled in school or training programs in exchange for the expectation of higher wages later, after they acquire new knowledge and skills. d. Government policies that support or encourage research and development can help increase an economy’s productivity by increasing the stock of technological knowledge....
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