Chapter 7 - The Economy at Full Employment

significant technological improvement

A(n) ________ will enable the economy to increase the level of both actual and potential output.

full employment output

In an open economy, ________ is divided among four uses: consumption, investment, government purchases, and net exports (exports- imports): Y= C + I + G + NX.

Principle of Diminishing Returns

________:** Suppose we produce output with two or more inputs and we increase on input while holding the other inputs fixed.

Full employment

________ means an economy has frictional and structural unemployment but no cyclical unemployment.

positive technological shock

A(n) ________ would increase labor demand and result in both higher wages and higher employment.

Principle of Opportunity Cost

________:** The opportunity cost of something is what you sacrifice to get it.

total level of output

It explains how the ________ or GDP in the economy is generated from the factors of production.

Capital

________ is one of the key factors of production.

full employment model

The ________ is used to analyze the long- term issues, such as the role taxes play in determining the level of GDP and how immigration affects wages and GDP.

F

________= the relationship between the factors of production and output.

stock of capital

K= the ________.