Question

The production function explains O A. all the machines, equipment, and buildings in the entire economy. O B. how the total level of output or GDP in the economy is generated from the factors of production. ° C. the efforts, both physical and mental, of all the workers in the economy used to produce goods and services. O D. All of the above

Answer 1

1. Production function is the functional relationship between the physical input and physical output of a commodity. It shows how a given amount of factors generate a given amount of output.

Answer: B- how the total level of output or GDP in the economy is generated from the factors of production.

2. Crowding out in an open economy is the reduction in personal consumption and investment and less export due to the increased government spending by a method of deficit financing. The increased spending by the government through borrowing from the public increase the rate of interest and the increase in rate of interest reduce consumption of goods and services and private investment, the increased interest in the domestic market attracts the flow of foreign funds into the economy leading to an appreciation in the value of currency and this further reduce the net export from the economy.

Answer: C- Decreased government spending is replaced by increased consumption, investment and net exports.

3. Immigration leads to an increase in the supply of labour in a particular area or nation. This increased supply will reduce the wage rate.

Answer-C- Real wages have fallen as the supply of labor has increased.