Macroeconomics-Chapter 20
Let's assume the U.S. dollar/Mexican peso exchange rate is 1/15 pesos and the price of a Big Mac in the United States is $4. Mexico's GDP is 18,000 billion pesos, and its population is 130 million people. Assuming the countries have purchasing power parity, the price of a Big Mac in Mexico is _________ pesos. (Round your response to the nearest integer.) Mexican income per capita is _________ thousand pesos. (Round your response to the nearest integer.) Mexican income per capita in U.S. dollars is _________ thousand USD. (Round your response to the nearest integer.)
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Suppose that country A has higher real income per capita than country B. Explain why this does not imply that most citizens of country A have higher real income than most citizens of country B.
A high degree of income inequality in country A may result in most of its citizens having incomes below the average income of country B.
If you were trying to improve macroeconomic growth and lower poverty rates in the developing world, which of the following would you encourage the U.S. government to fund?
A mix of well-targeted programs that improves the productivity and provides financial aid to poor segments of the population.
What are the two components of technology? (Check only two.)
A more efficient means of production. The knowledge of how to produce new products.
Based on the information, _________ would be considered more productive since its _________GDP is higher. Using the information given in both of these tables to compare living standards in Lusitania and Arctica, you should use ____________.
Artica, income per worker income per capita
What policies can be used to raise real GDP in a country? (Check all that apply.)
Improve efficiency in the allocation of resources. Raise physical and human capital. Increase technology.
In the book "Dead Aid," economist Dambisa Moyo argues that humanitarian aid-provision of food or medicine to poor families, for example-is an ineffective tool for promoting growth in the developing world. Instead, she argues in favor of foreign aid policies that encourage/subsidize foreign investments in the businesses of developing countries. Which of the following will be the short-term and long-term effects of foreign investments on aggregate growth?
In the short run, the productivity of workers and the GDP per capita of an economy will increase, while in the long run, the effect on the GDP per capita of the economy will depend on the productivity enhancing investment.
The following table lists 2012 GDP per capita for four countries. The data are given in the national currencies of the countries. It also lists the price of a Big Mac in local currency in each country in 2012. The price of a Big Mac in the United States in 2012 was $4.20. Using the Big Mac as a representative commodity common to the countries, calculate the purchasing power parity (PPP)-adjustment factor for each country, and then the PPP level of GDP per capita in each country. 2012 GDP Per capita 2012 Big Mac Price 579,162 41 krone 41,398 9.1 zloty 19,580 6.6 Turkish lira 24,740 2.4 pounds Purchasing Power Parity(PPP) adjustment factor for each country? PPP level of GDP per capita?
PPP: Norway: 4.20 / 41 = 0.102 Poland: 4.20/ 9.1 = 0.462 Turkey: 4.20 / 6.6 = 0.636 United Kingdom: 4.20 / 2.49 = 1.687 PPP level of GDP per capita: Norway: 0.102 x 579162 = 59075 Poland : 0.462 x 41398 = 19125.876 Turkey: 0.636 x 19580 = 12452.880 United kingdom : 1.687 x 24740 = 41736.380
The following table gives you the same information for the country Arctica Population total in Artica = 80 mill. Employment = 40 mill. Real Gross Domestic Product (GDP) = 3,600 bill. Real income per capita in Arctica is $ _________. (Round your response to the nearest dollar.)
Real income per capita = Real GDP / total population 3,600 billion / 80 million = 45,000 Real income per worker in Artica: 3,600 billion / 40 million = 90,000
Suppose you are given the following information on the country Lusitania: Population total in Lusitania = 246 mill. Employment = 110 mill Real Gross Domestic Product (GDP) = 2,476 bill. Real income per capita in Lusitania is $ _________. Real income per worker in Lusitania is $_________. (Round your response to the nearest dollar.)
Real income per capital = Real GDP / total population 2476 billion / 240 million = 9,379 Real income per worker in Lusitania: 2476 billion / 110 million = 22,509
Suppose you are comparing the income per capita in the United States and Ghana. You try two approaches. In the first approach, you convert the Ghana values into U.S. dollars using the current exchange rate between the U.S. dollar and the Ghanaian cedi. In the second approach, you also convert both values to U.S. dollars using the purchasing power parity-adjusted exchange rate. Which approach is likely to give you a more accurate picture of the living standards in both countries?
The second approach, because it takes into account the relative costs for each country.
Complete the formula for the aggregate production function. Y stands for _________ K is the _________ H is the _________ F is best described as _________
Y = F (K, H). real GDP physical capital stock of the nation efficiency units of labor used in production a relationship between the variables
Physical capital is _________.
any good, including machines and buildings, used for production.
Use the following diagram to explain the relationship between a country's physical capital stock and GDP. The diagram shows ____________. (Check all that apply.)
both the increasing relationship between capital and output and the law of diminishing marginal product. the aggregate production function, holding total efficiency units of labor constant.
In this question, we will use what you learned in the second part of the chapter to compare the performance of an economy in two different time periods, as its physical capital stock and efficiency units of labor change. Suppose that from period 1 to period 2, the unemployment rate in the economy increases. Everything else remains unchanged. The total efficiency units of labor will _________ because _________. What are the consequences of this increase in unemployment for GDP? What are the consequences of this decrease in real GDP for real GDP per capita and real GDP per worker? Suppose that there is technological advance from period 1 to period 2 but, at the same time, a decrease in the physical capital stock? Can you say whether real GDP will increase or decrease?
decrease, less workers are employed Y1 > Y2. Both of these items will decrease. Not really, since the two items have offsetting effects.
Human capital is _________.
each person's stock of skills to produce output or economic value.
The United States is currently a relatively rich country. How do the following items support U.S. economic strength? Sam Walton, the founder of Walmart, is an example of the power of _________, which creates economic growth. Your university or college is an example of _________, which contributes to economic growth. The nation's ports are examples of _________, which contributes to economic growth. New developments that enable natural gas and oil fracking are examples of _________, which contributes to economic growth.
entrepreneurship human capital physical capital technology
The effect of foreign investments on the poverty rate will depend on the __________.
redistribution of income among the poor segments of society.
Productivity varies across countries because of differences in ____________. (Check all that apply.)
technology, human capital, physical capital
Technology is _________.
the ability to use labor and capital more efficiently.
Productivity is ____________. Productivity varies across countries because ___________.
the value of output that a worker generates for each hour of work. all of the above.
In a particular study, economists at the World Bank ranked some countries on the basis of GNP per capita as well as HDI. They also computed the difference between the ranks to have a comprehensive idea about the performance of these economies. Their observations on Switzerland and China for the year 1999 are given in part a, and for Sweden in the years 1999 and 2012 in part b. a. Does the information in the table below suggest, in any way, that people in China were better off than the people in Switzerland in 1999? Explain your answer. Countries GNP Per Capita (PPP$)Rank MinusHuman Development Index Rank Switzerland -7 China 29 b. What does the information in the table below suggest about the relationship between income per capita and HDI in a country? Per Capita Income Rank HDI Rank 1999 28 6 2012 14 7
a. No, it only implies that China's HDI rank was much higher than its per capita income rank, while Switzerland's HDI rank was lower than its per capita income rank. b. It suggests that HDI in a prosperous country may be largely unrelated to income per capita.
