In the late 1970s, the United States experienced a productivity slowdown that de
ID: 1109100 • Letter: I
Question
In the late 1970s, the United States experienced a productivity slowdown that decreased the marginal product capital. This caused:
a rightward movement along the IS curve.
rising nominal interest rates.
a decline in inflation expectations.
a shift in the aggregate supply curve.
a leftward shift of the IS curve.
a.a rightward movement along the IS curve.
b.rising nominal interest rates.
c.a decline in inflation expectations.
d.a shift in the aggregate supply curve.
e.a leftward shift of the IS curve.
Explanation / Answer
Answer.) e.) a leftward shift of the IS curve.
The marginal product of capital represents the incremental gain in output as additional capital is added to the capital stock, holding the labor input fixed. Decrease in marginal product capital resulted in fall in production levels.
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