Explain the theory behind convergence and why it is a "deceptively simple" theory
What will be an ideal response?
Convergence is the tendency for gaps between industrialized countries' living standards (i.e. per capita income) to narrow. If trade is free, if capital can move to countries offering the highest returns, and if knowledge itself moves across political borders so that countries always have access to new production technologies, then there is no reason for international income differences to persist for long. Some differences, however, do exist because of policy differences across industrial countries.
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In real business cycle models and new classical models
a. monetary factors are responsible for fluctuations in output and employment. b. changes in unemployment are involuntary. c. markets always clear. d. prices and wages are perfectly flexible. e. none of the above.
World agreements to solve global environmental externalities will probably require high income countries to do which of the following?
a. Pay some of the costs but not most of the costs. b. Prevent low income countries from industrializing. c. Share the costs. d. Pay most of the costs.
Two economists found empirical evidence that when the price of rice decreased in the Hunan province of China, local residents consumed less rice than before the price decrease. The study provides a real-world example of a(n)
a. normal good. b. inferior good that is not a Giffen good. c. Giffen good. d. luxury good.
The tangency points between the long-run average cost curve (LRAC) and the short-run average cost curves (SRAC) are
A) always at the minimum of the SRACs. B) never at the downward portion of the SRACs. C) always at the maximum of the SRACs. D) not necessarily at the minimum of the SRACs.