To answer each of the questions, here is an explanation of how to arrive at the correct answer:
41. The purpose of indexing Social Security payments to the CPI is to increase the payments in line with the rate of inflation. The CPI measures changes in the cost of living over time, so indexing the payments ensures that Social Security recipients can maintain their standard of living as prices rise.
42. The rule of 70 states that the number of years for a variable to double equals 70 divided by its annual growth rate. This is a simple formula used to estimate the time it takes for a quantity to double based on its growth rate.
43. In the aggregate production function, the term K/L represents capital per worker. It measures the amount of physical capital available per worker and is an important determinant of productivity and output per worker.
44. Technological progress allows workers to produce more even when the amount of physical capital and human capital do not change. This is because technology improves the efficiency and effectiveness of production processes, enabling workers to produce more output with the same inputs.
45. If technology advances, more output can be obtained from the same inputs. Technological advancements improve the productivity of inputs, allowing for greater output without the need for additional inputs.
46. An example of human capital would be the job skills a person has. Human capital refers to the knowledge, skills, and abilities that individuals possess, which contribute to their productivity and earning potential.
47. Governments can engage in saving when taxes are greater than expenditures. By running budget surpluses, the government can generate savings that can be used to repay debt or invest in infrastructure and other productive assets.
48. The budget balance is equal to taxes minus government spending. It represents the financial position of the government, showing whether it is running a surplus or a deficit.
49. A difference between a closed and an open economy is that in the latter, foreign savings complement domestic savings in financing investment spending. In an open economy, capital can flow across borders, allowing for the use of foreign savings to finance domestic investment.
50. Capital inflows represent the net inflow of funds into a country. This includes foreign investments, loans, and other forms of financial inflows that increase the amount of capital available in the country.
51. The main role of financial systems is to channel funds from savers into investments. Financial systems facilitate the transfer of funds from households and businesses with excess savings to those who need capital for investments.
52. A financial asset is a claim that entitles the owner to future income from the seller. It represents a contractual agreement between the buyer and the seller, where the buyer has a right to receive a future payment or a share of profits.
53. Transactions costs are the expenses of negotiating and executing a deal. They include fees, taxes, legal expenses, and other costs associated with buying or selling goods, services, or financial assets.
54.