1. With no change in labor productivity, what would happen to the real wage rate and potential GDP if the population increased?
2. How will an increase in physical capital affect labor productivity, labor demand, and potential GDP?
3. List and explain the factors that can increase labor productivity.
4. Begin with the formula showing how households can divide their income. Then use this formula and the expenditure approach to GDP to show how investment is financed from three sources.
5. What is the influence of the expected profit and the real interest rate on the amount of investment firms make?
6. How does the real interest affect households' decisions about saving?
7. What is the difference between the long-run aggregate supply and the short-run aggregate supply curves?
8. What is the difference between a recessionary gap and an inflationary gap?