When thinking about the Production Function, what does K/L measure?

a. output per worker

b. physical capital per worker

c. human capital per worker

d. average wages per worker

Suppose the Canadian government allowed taxpayers to earn their first $10,000 of interest income free of any tax. How would this shift the supply of, or demand for, loanable funds compared to a world without this tax break?

a. The demand for loanable funds would shift to the left.

b. The supply of loanable funds would shift to the left.

c. The demand for loanable funds would shift to the right.

d. The supply of loanable funds would shift to the right.

What will happen to the interest on a bond as the bond's term increases?

a. The bond will pay less interest because it has less risk.

b. The bond will pay more interest because it has more risk.

c. The bond will pay less interest because it has more risk.

d. The bond will pay more interest because it has less risk.

Terminus and Trantor are two countries that are the same except one has less physical capital, and so less real GDP per person. Suppose that both increase their saving rate from 5 percent to 7 percent. What will happen in the long run if there are diminishing returns to capital?

a. Both countries will have higher levels of real GDP per person, and the temporary increase in growth in the level of real GDP per person will have been greater in the country with less capital.

b. Both countries will have higher levels of real GDP per person, and the temporary increase in growth in the level of real GDP per person will have been greater in the country with more capital.

c. Both countries will have permanently higher growth rates of real GDP per person, and the growth rate will be higher in the country with less capital.

d. Both countries will have permanently higher growth rates of real GDP per person, and the growth rate will be higher in the country with more capital.