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After two quarters of increasing levels of production, the CEO of Canadian Fabrication & Design was upset to learn that, during this time of expansion, productivity of the newly hired sheet metal workers declined with each new worker hired. Believing that the new workers were either lazy or inefficiently supervised (or possibly both), the CEO instructed the shop foreman to "crack down" on the new workers to bring their productivity levels up.
a. Explain carefully in terms of production theory why it might be that no amount of "cracking down" can increase worker productivity at CF&D.
b. Provide an alternative to cracking down as a means of increasing the productivity of the sheet metal workers. Fully explain your alternative in terms of production theory.
Explain how an increase in interest rates initiated by the Federal Reserve affects:
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Using the Lerner index, find the price elasticity of demand for Botox and interpret what this value means to total revenue if the price of Botox were increased one percentage point.
If increased government spending and tax cuts were equally effective in stimulating aggregate demand, which fiscal tool would you select? Why?
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If the reserve ratio is 15 percent and commercial bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired checkable deposits, then the relevant monetary multiplier for the banking system will be:
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