1. National Income (Closed Economy)

• What are the characteristics of the Cobb-Douglass Production Function?
  • What has constant returns to scale?
  • What has diminishing returns to scale?
  • What do the exponents on K or L represent?
• What are the factors of production? What will their prices be in a perfectly competitive market?
  • What are MPK and MPL equivalent to?
• What is one theory that can use the Cobb-Douglass Production Function to explain the early growth of the West?
• What are some theories for the increased capital share of income?
• How to calculate national income? (Think Y = C + I + G).
• What is the interest rate? What role does it play?
• How do changes in G or T affect the market for loanable funds?