Explain why even small changes in the rate of economic growth are significant. Use the “rule of 70” to demonstrate the point.
What will be an ideal response?
Small changes in the rate of growth can be very meaningful, especially for a country where a fraction of a percent change in the growth rate may mean the difference between starvation and hunger.
Over a period of time small changes are cumulative in the same way that compound interest payments are cumulative on a bank account. Using the rule of 70 to estimate the time it takes to double GDP, we can see that a country whose growth rate is 5% takes 14 years to double its GDP, but a country whose growth rate is 3% may take nearly 10 years longer to double its GDP or about 23.3 years. If these countries continued to grow at their respective 5% and 3% rates, in 28 years the first country’s GDP would be quadrupled, whereas in the second country, it would take nearly 47 years to quadruple its GDP from the current year.
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Show graphically and explain why targeting an interest rate is preferable when money demand is unstable and the IS curve is stable
What will be an ideal response?
The Social Security Trust Fund
a. will provide a stream of future revenue for the federal government. b. is a "pot" of money set aside for the payment of future benefits. c. is a net asset of the U.S. Treasury worth approximately $2 trillion. d. is of zero asset value to the federal government.
The Constitution of the United States says nothing about state economic activity.
A. True B. False C. Uncertain
(1)(2)(3)(4)(5)QdQdPriceQsQs5040$1070806050960708060850609070740501008063040Refer to the above table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $9:
A. a surplus of 20 units would occur. B. the market would clear. C. a shortage of 20 units would occur. D. demand would change from columns (3) and (2) to columns (3) and (1).