Econ Chapter 19

A country with an extremely low standard of living is unlikely to have _____.

an effective education system

Unlike high-income countries, which typically do not experience high levels of inflation, low- and middle-income countries can experience severe inflation because of _____.

budget deficits

Which statement best explains why looking at the unemployment rate can be misleading when it comes to evaluating the economy of a low-income country?

Many workers in low-income countries do not participate in the official labor market.

What is net exports?

Net exports is the difference between a country's total value of exports and total value of imports.

Is GDP a good measure of standard of living?

No, because GDP is not a reliable when calculating quality of life. GDP does not take into account whether income is equally distributed.

Would the sale of a used guitar be counted in GDP? Why?

No, the measurement of GDP involves counting up the production of millions of different new services and goods within the current year.

Which statement best explains why low-income countries face difficulties achieving economic growth?

Private saving is extremely low since incomes must be spent on necessities.

Suppose Country X has a GDP per capita of $50,000, and Country Y has a GDP per capita of $25,000. Country Y has a higher _____ than Country X.

Standard of Living

What is the effect on equilibrium wage and employment of a rightward shift in labor supply and labor demand?

The change in wage is indeterminate, while employment increases.

Why are only "Final" goods counted in GDP?

The final goods are counted in GDP so that double counting does not occur.

Suppose a low-income country is seeking a significant increase in foreign investment. Without the capacity for domestic investment in human or physical capital, the country can do which of the following to make itself more attractive to foreign investors?

Undertake political reforms to strengthen the rule of law and improve political stability.

How are nominal and real GDP different?

Values for real GDP are adjusted for differences in price levels, while figures for nominal GDP are not.

Which of these conditions is most likely to improve a country's trade balance?

a depreciating currency

A developing country that encourages a large amount of foreign investment runs the risk of _____.

a sudden recession

What is a trade surplus?

exists when a nation's exports exceed its imports

In order for an underdeveloped economy to benefit from market-oriented reforms, it needs to focus on _____.

human development

Economic development in middle-income countries is most likely to be driven by____________.

low monetary growth

A country with a per capita GDP of $8,000 is considered _____.

middle income

What does the Keynesian economic model do?

points out that both monetary and fiscal policy tools are available

Suppose Country X is considered a converging economy. Country X is experiencing _____.

rapid economic development

Foreign aid to low-income countries is most likely to succeed at _____.

reducing short-term suffering

What is theNorth American Free Trade Agreement (NAFTA), ?

the United States, Canada, and Mexico pledged themselves to reduce trade barriers.

What factor most directly contributes to cyclical unemployment?

the business cycle

Whats a converging economy?

the economy of a country that demonstrates the ability to catch up to the technology leaders

The natural rate of unemployment will go up if _____.

the government adopts restrictive worker-protection laws

What is GDP ?

the value of the output of all goods and services produced within a country in a year.

What do we use purchasing power parity for?

to convert average incomes into comparable units