Author Question: What causes capital and labor shares of gross domestic product to remain consistent over the years? ... (Read 58 times)

ETearle · **on:** Jun 30, 2018

What causes capital and labor shares of gross domestic product to remain consistent over the years?

What will be an ideal response?

Question 2

A bank is insolvent when:

A) its total assets exceed its total liabilities.
B) its stockholders' equity exceeds its total assets.
C) its stockholders' equity exceeds its total liabilities.
D) its total liabilities exceed its total assets.

kardosa007 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Economic forces keep the labor and capital shares of income almost perfectly constant. Here is an example of how these forces work. Suppose that capital started to become scarce relative to the amount of labor and the capital share of income consequently began to decline. The growing scarcity of capital would cause capital's value to grow, leading to higher payments to each unit of capital and greater subsequent investment in capital. Both of these mechanisms would offset the decline in the capital share of income. Forces like this prevent the capital and labor shares of income from moving around very much.

Answer to Question 2

D