Author Question: The Keynesian short-run aggregate supply (SRAS) curve A) shows that real Gross Domestic Product ... (Read 101 times)

Yi-Chen · **on:** Jun 30, 2018

The Keynesian short-run aggregate supply (SRAS) curve

A) shows that real Gross Domestic Product (GDP) will increase only if the price level increases.
B) is horizontal.
C) assumes a full-employment level of real Gross Domestic Product (GDP).
D) does not reflect any changes in nominal Gross Domestic Product (GDP).

Question 2

Explain Paul Romer's ideas concerning economic growth.

What will be an ideal response?

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

Answer to Question 1

B

Answer to Question 2

Romer argues that knowledge is a factor of production just as capital and labor are. Economies must invest in education as they do in capital. Past investments in capital make it profitable to acquire more knowledge, implying that investment leads to new knowledge that leads to new investment. There can be an investment-knowledge cycle that continually stimulates economic growth. According to Romer, ideas drive economic growth.