Use the rule of 70 to illustrate how small differences in growth rates can have a large impact on how rapidly the standard of living in a country increases
What will be an ideal response?
The rule of 70 refers to a calculation that determines, for a given growth rate, the number of years it will take for real GDP to double in an economy. The formula is as follows:
Number of years to double = .
If the growth rate is 1%, it will take 70 years for GDP to double. If the growth rate is 2%, GDP will double in 70/2 years = 35 years. A small increase in the growth rate (from 1% to 2%) cuts the years it takes for the economy to double in half. If the growth rate is 5%, GDP will double in 14 years. So when the rate of growth jumps 3 more percentage points, GDP doubles in less than half the time as when growth was 2%.
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Which of the following is key for the Coase Theorem to reach an optimal solution to an externality?
A. Clearly defined property rights B. Both parties having property rights C. No property rights D. A single party with property rights
A tax on sellers:
A. shifts the demand curve left by the amount of the tax. B. shifts the demand curve down by the amount of the tax. C. shifts the supply curve up by the amount of the tax. D. shifts the supply curve left by the amount of the tax.
When long-run average total cost decreases as output increases, a firm experiences
a. increasing average fixed cost b. decreasing total cost c. economies of scale d. diseconomies of scale e. constant returns to scale
Profit equals total revenue minus total cost
a. True b. False Indicate whether the statement is true or false