Question

An Introduction to Macroeconomics

DISCUSSIN QUESTIONS

2. Consider a nation in which the volume of goods and services is growing by 4 percent per year. What is the likely impact of this high rate of growth on the power and influence of its government relative to other countries experiencing slower rates of growth? What about the effect of this 4 percent growth on the nation’s living standards? Will these also necessarily grow by 4 percent per year, given population growth? Why or why not? LO2

3. Did economic output start growing faster than population from the beginning of the human inhabitation of the earth? When did modern economic growth begin? Have all of the world’s nations experienced the same extent of modern economic growth? LO3

4. Why is there a trade-off between the amount of consumption that people can enjoy today and the amount of consumption that they can enjoy in the future? Why can’t people enjoy more of both? How does saving relate to investment and thus to economic growth? What role do banks and other financial institutions play in aiding the growth process? LO4

Answer 1

2. Consider a nation in which the volume of goods and services is growing by 4 percent per year. What is the likely impact of this high rate of growth on the power and influence of its government relative to other countries experiencing slower rates of growth? What about the effect of this 4 percent growth on the nation’s living standards? Will these also necessarily grow by 4 percent per year, given population growth? Why or why not

If a nation is growing by 4% per year.

It means that it is able to produce a vast amount of goods.

It can increase its exports to other countries who do not have the goods.

The nation can use this to its advantage and can hold political leverage over another nation where another country would have to obey the strong nation's terms an conditions in order to import necessary items.

The stronger nation can provide loans to the weaker nation and if the weaker nation fails to return the loan the stronger nation can exert power and influence over the weaker nation, for example the stronger nation might ask the weaker nation to provide contracts to all development activities to the citizens of its own country and so on.

While a nation is growing at 4% a year , it doesnt mean that its living standards also improved.Since the population growth is constant. The 4 % growth can be captured by only the wealthy members of the country making the already rich even richer at the cost of the poor people.

A nation's growth rate cannot capture everything.