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University of Newcastle

ECON1002 Macroeconomics in the Global Economy

Discussion questions Set 3

Working independently, you should prepare answers to submit for questions 1-6.
Answers must be Typed and not hand written.
Your instructor will mark one of the six questions for assessment.
Answers for the six questions should not exceed 700 words in total. (This excludes
diagrams and tables.)
Answers must be submitted in your weekly workshop.

Workshop Discussion Questions

3 Labour and Capital
1. How do competitive markets with flexible wages and
Textbook: Stiglitz et al prices ensure that labour is always fully employed? What
(2015) Chp: 3 induces firms to create just the right number of additional
jobs to match an increase in the number of workers?

2. What is investment? Why does investment decrease when

the real interest rate increases? What role do expectations
play in investment?

3. True or false: Since growthoriented policies might have

an effect of only one per cent or two per year, they are not
worth worrying much about. Explain.

4. What are the four possible sources of labour productivity


5. What policies might the government use to boost labour

productivity growth?

6. What is technical progress and how is it measured?