Question

In an aggregate production, output per worker typically increases at an increasing rate as more physical...

In an aggregate production, output per worker typically increases at an increasing rate as more physical capital per worker is added to the production process.

true or false? Explain

In the aggregate demand/aggregate supply model, when the central bank sells treasury bonds to commercial banks, the aggregate demand curve will shift to the left

ture? false?

pls explain why

Homework Answers

Answer #1

- true

There is diminishing returns to labor, that is output increases at a decreasing rate when we have fixed capital. This is so because if only number of workers is increasing and therr is no change in capital their productivity will decrease. This probkem is resolveld when we increase capital along with labor. The labor productivity increases with increase in capital. This increases output per worker at the increasing rate.

- true

When central bank sells bonds, it sells it in exchange for money from the public. This reduces total money supply in the market. This reduces aggregate demand and as a result aggregate demand shifts to the left.

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