Econ 203 Chapter 9 |11 Questions| With Correct Answers.

Solow Residual {Ans: the amount of growth in GDP that cannot be accounted for by growth in the labour force or by growth in the capital stock. Changes in technology}National Savings Equation {Ans: NS=Y*-C-G}The paradox of thrift {Ans: Frugality on the part of individuals, which may be good for each individual taken separately, ends up causing an economic recession. An increase in the country's total desired savings would shift the AD curve to the left and reduce the equilibrium level of real GDP in the short run.}Neoclassical growth theory {Ans: a theory of economic growth that proposes that real GDP per person grows because technological change induces an amount of saving and investment that makes capital per hour of labor grow}Embodied Technological Changes {Ans: Improved technology which is attributed to investments in new equipment}Closing an inflationary gap {Ans: 1. Adjustment Process. Excess demand for factors will cause wages and other factor prices to rise, shifting the AS curve upward and gradually restoring output to Y* 2. Contractionary Policy. The government can use contractionary fiscal policy to shift the AD curve to the left by increasing tax rates, reducing transfers, or reducing its level of