Solutions for Chapter 7: Economic Growth and Productivity

a curve that shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level

the limit on the consumption bundles that a consumer can afford

the accumulation of a sum of money in, say, a bank account, where the interest earned remains in the account to earn additional interest in the future

the property whereby long-run average total cost falls as the quantity of output increases

the uncompensated impact of one person’s actions on the wellbeing of a bystander

the total number of workers, including both the employed and the unemployed

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

a small incremental adjustment to a plan of action

a situation in which a market left on its own fails to allocate resources efficiently

the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior

the normal rate of unemployment around which the unemployment rate fluctuates

a market structure in which only a few sellers offer similar or identical products

an absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

a tax for which highincome taxpayers pay a larger fraction of their income than do low-income taxpayers

a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries

an action taken by an informed party to reveal private information to an uninformed party

the change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution

the manner in which the burden of a tax is shared among participants in a market

the political philosophy according to which the government should choose policies to maximize the total utility of everyone in society