Question

Dan Demaar and Rob Runten are working on a class assignment on economic growth. Dan collects the GDP growth data for the country​ Fanez, which is located in the Middle East. He states that the standard of living in Fanez must have increased remarkably over the past ten years because its real GDP per capita increased from​ $5,000 to​ $5,633. Rob does not fully agree that the situation has improved substantially over these 10 years. He looks at the data and points​ out, that growth in Fanez was in fact very slow during this time. Its annual growth​ rate, while always​ positive, never exceeded 1.2 percent.

While arguing that the growth rate was too low for living standards to have improved during these 10​ years, which of the following relevant issues is Rob​ ignoring?

A. the effect of compounding over the ten years

B. the effect of high inflation in the economy

C. the share of​ Fanez' economy in global GDP

D. the relative value of​ Fanez' currency​ vis-a-vis foreign currencies

E. the slow growth of the​ country's labor force

Answer 1

Rob is ignoring the share of Fanez economy in global GDP because the biggest slice of the global economy pie and the top 10 economies go into recession. The impact would be felt hardest on low income households, said the IMF and threatens to undo three decades of progress to reduceextreme poverty. The top economies combined made up two thirds of GDP while the 42 represented on the chart made up just over 90 % of the world's GDP and rest of the world accounted for the remaining 9.8 %.

GDP production defines the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time normally a year.GDP growth rate is an important indicator of the economic performance of a country. The economic growth model explains growthmodel explains growth in real gdp per capita in the long run.Because of the importance of labour productivity in explaning economic growth the economic growth .The economic growth model focuses on the causes of increases in long run labour productivity.There for the living standard of Fanez also increase.