Question

For each of the following statements, please indicate if it is TRUE or FALSE. Then provide a justification or explanation of your answer to each question in less than 30 words

1. The equation, Y = C+I+G+NX, implies that increasing government purchases of goods and services (G) and increasing net exports (NX) are two clear long-term strategy for raising national income (Y).
2. The equation, Y = AK^0.5L^0.5, implies that in a competitive economy, the national income (Y) gets equally divided between the workers (L) and the owners of capital (K), leaving the suppliers of TFP (A) uncompensated

Answer 1

1) True

as government spending increases and net export increases this means that government spending impact on both demand and supply side due to this our aggregate demand increases and when net exports increase this means exports is greater than import here 1 more positive point increase to increase the aggregate demand, so both are the clear strategy for increasing national income

2) True

this is cobb Douglas production function, in any production function what we requaire to produce an output is input with capital and labour, here is 0.5 and 1- is 0.5 this means capital and labour is divided equally