One effect of inflation is that it is a tax that redistributes ...

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One effect of inflation is that it is a tax that redistributes goods and services from
 
  A) investors to savers.
  B) households and businesses to the government.
  C) businesses to households.
  D) government to households.
  E) government to businesses.

Question 2

In the classical theory of growth, what is the final outcome of an increase in growth and labor productivity?
 
  What will be an ideal response?

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Answer to Question 1

B

Answer to Question 2

In the classical growth theory, a rise in labor productivity and the resulting economic growth result in a population explosion that drives real GDP per person back to the subsistence level. In the classical viewpoint, resources are limited and technological change occurs infrequently, so that technological advances are not sufficient to compensate for the lack of resources. Hence, in the long run people earn only a subsistence level of real income.

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TYSM

[Liddy]

Thanks for the timely response, appreciate it