Economic growth can be especially fast in countries that are playing catch-up to other countries with higher GDP per capita. As a result many economists have suggested a general principle known as the convergence hypothesis. It says that differences in real GDP per capita among countries tend to narrow over time because countries that start with lower real GDP per capita tend to have higher growth rates. Assume that this hypothesis is true. Illustrate the convergence hypothesis by using the line tool to draw an appropriate straight line, label it as the catch-up line. On this line use the point tool to plot points to represent two countries: one with a higher growth rate (label it B) and one with a lower growth rate (label it A).
What will be an ideal response?
The catch-up line (and the convergence hypothesis) emphasizes the inverse relation between the growth rate of real GDP per capita (measured along the vertical axis) and the level of real GDP per capita. Consequently, real GDP per capita should be measured along the horizontal axis. The catch-up line is downward sloping. On the line, the high growth country, B, lies up and to the left of the low growth country, A.
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Open market operations are defined as
A) a bank borrowing from the Fed. B) the buying and selling of securities by the Fed. C) the buying and selling of securities between banks. D) the amount banks can lend on each deposit. E) a bank making a loan to the Fed.
How does a market system prevent people from getting as many goods and services as they wish?
A) In a market system, firms can charge any price they want, thus preventing poor people from getting as many goods and services as they wish. B) Governments interfere with the market mechanism to influence the allocation of goods and services. C) The market system allocates goods and services to those who are able to pay for those products and therefore income is a limiting factor. D) The government imposes taxes on those who earn beyond a certain amount of income.
The logic of why international trade increases well-being is
a. a major revision of the logic of why trade within a country increases well-being. b. completely different from the logic of why trade within a country increases well-being. c. a narrow, special case of the logic of why trade within a country increases well-being. d. no different from the logic of why trade within a country increases well-being.
The countries of ______ and _____ have a significant influence over changes in U.S. interest rates.
Fill in the blank(s) with the appropriate word(s).