Question

In: Economics

#11.1 A competitive market system discourages growth unless government protects domestic firms from foreign competition. encourages...

#11.1

A competitive market system

  • discourages growth unless government protects domestic firms from foreign competition.

  • encourages growth by allowing producers to make profitable investment decisions based on market signals.

  • discourages growth because firms busy competing have no time to innovate or invest.

  • encourages growth by ensuring that everyone in society will receive a decent standard of living.

#10.1

Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect

  • labor productivity to rise.

  • future consumption to fall.

  • a lower rate of growth of real GDP.

  • present consumption to rise.

#7.1

Unanticipated inflation tends to penalize

  • people who save money in financial institutions.

  • businesses which borrow money from financial institutions.

  • governments that have a progressive personal income tax.

  • individuals who borrow money from financial institutions.

Solutions

Expert Solution

11.1 Option B.

  • A competitive market system encourages growth by allowing producers to make profitable investment decisions based on market signal's.
  • When a market is highly competitive, producer's aim at increasing more profits by producing more goods efficiently than other competitors.
  • This induces more Economic growth and firms as they can get more information about their competitors when they are in the same market through market signal's.

10.1 Option A.

  • Capital goods refer to those goods that help producers in production of other goods and services.
  • When the resources are reallocated to these capital goods and then when these goods are used up for production of other goods, the overall labour productivity increases.

7.2 Option A.

  • An unanticipated inflation refers to the rise in general price level of goods and services in an economy without the knowledge of people. Or it is an inflation that occurs unexpectedly.
  • Due to the unexpected rise in prices of goods and services, the people who save money in financial institutions suffer more as they will receive less interest on their savings with which they cannot fight against the inflation.

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