Question

Pick any two questions (each question should be half a page)

10. Globalization seems to have brought benefits for almost everyone, though one exception is African farmers. Blocked from global food markets by trade restrictions, Africans cannot take part in the prosperity globalization has brought to the rest of the world. Many of the health crises such as AIDS, malnutrition, and even starvation are clearly linked to poverty. Moreover, many of Africa’s nations are politically unstable. If African farmers had better access to global markets, what would the implications be for African societies, nations, and economies?

11. Explain how our standard of living depends upon our level of real GDP per person but there might not be a one-to-one relationship between the standard of living and real GDP per person. Give examples of things that can effect one but not the other.

12. "If country A has a higher level of real GDP per person than country B, then people in Country A must enjoy a higher standard of living than people in Country B." Is this statement true or false and explain your answer.

13. Explain the relationship(s) between full employment, cyclical unemployment, the natural unemployment rate, and potential GDP.

14. For the past decade, the unemployment rate in Western Europe has been higher than the unemployment rate in the United States. Based on this fact, is the natural unemployment rate larger in Western Europe or in the United States? Why might the natural rates differ between the two areas?

15. In the late 1970s, the inflation rate was over 10 percent per year. Many home mortgage lending institutions had mortgages outstanding that had been made in the 1960s at nominal interest rates of around 5 percent per year. Many of these lending institutions failed; what can explain the high failure rate of lenders in the late 1970s?

16. CPI is not necessarily a reflection of how all consumers experience inflation. How does your personal market basket compare to that of the average American household? Given that college students may rely on more fixed incomes than most groups (financial aid), why do price trends pose more of a problem for this group?

17. Policymakers (especially the Federal Reserve) tend to focus more on core inflation when designing policies. Why core inflation is a useful measurement for the government or economists?

18. Classical growth theory is based on the work of Thomas Malthus, an economist from the early nineteenth century. Very few modern-day economists would refer to themselves as Malthusians. The persistence of this viewpoint represents what one can only refer to as the triumph of despair over experience. At some point in history, Malthusian theory might have been applicable. But certainly since the industrial revolution, parents have chosen to have fewer children. And this shift only gets stronger as economic growth advances. Is the assumption correct that the population growth rate is primarily determined by economic growth with a positive relationship?

19. Is there convergence or divergence in standards of living amongst nations?

20. What is the role of economic growth for economic inequality?

Answer 1

Answer to Question 10)

In any economy, farmers are the most vulnerable group of people primarily because their produce is dependent upon a lot of factors such as area, irrigation, weather etc. Across the globe, farmers have benefited from globalization efforts which economies have had in the past. This is because the sector has benefitted from the adoption of techniques which other countries have had and have been able to import seeds and export the goods that are produced in the locality.

If African farmers are given better access to the global markets, the society would soon change. The increased production levels can be harnessed by the imports of foreign seeds and overall technology. As a result of this, the Gross Domestic Product could increase both in quantity and value. The foreign market is big for sale and if allowed people could make more money out of their produce. This would lead to higher income levels, increased local demand and life style of people would change.

On the front of the government, this would mean increased taxes which can be used for developing key areas such as Healthcare, Sanitation and education which the African countries currently lack.

Thus, allowing for globalization across the African continent would allow for an increase in production capacity as well as better returns to the business owners. This would then allow them to increase their living and lifestyles would change respectively.

Question 11)

Real GDP per person is a measure of the value of final goods and services produced in the country divided by the total number of people in a country. It is to be noted that this value is derived after taking into account the inflation levels in the economy.

Real GDP as a measure can often cause confusion among economists. This is because relating standard of living and Real GDP may prove to be ineffective in a situation where income inequality is present.

When countries experience income inequality, the amount of Real GDP may increase however, the overall living standards remain unchanged. This is because west majority of that wealth is held by the rich people who may have a significantly high standard of living but most people in the economy do not enjoy similar benefits.

In countries like India, Bangladesh, Sri Lanka etc even though the Real GDP has increased many folds over the years, yet areas exist wherein two square meals is a distant dream for people. This happens primarily because not everyone gets an equal share of the added GDP of a country and numbers may not give an exact picture unless the dynamics of inequality of income are given equal consideration.

Please feel free to ask your doubts in the comments section.