Question

2. If you are told that one country has a real GDP per capita of $20,000 and another country has a real GDP per capita of $40,000, explain what you know and don’t know about the differences in production and standard of living in those two countries. Make sure your answer shows that you understand exactly what real GDP per capita is!

3. Describe the phases and key characteristics of business cycles. Then explain where you think we are in the business cycle right now and why.

4. Explain how we measure economic growth and discuss three specific things that government could do to improve economic growth in the long run.

5. Our current unemployment rate is 3.6% in the United States. Explain as clearly as possible what that 3.6% means (where does that number come from?) Then explain how that compares to our goal for unemployment.

Answer 1

2)

Usually real GDP per capita is considered as measure of standard of living. High real GDP per capita implies the higher level of standard of living. real GDP means more productions of goods and services, first country has lower real GDP per capital, it means there is less availability of goods and services per person. So people would enjoy lower standard of living. Converse is true for second country where Real GDP per capita is higher.

Although higher real GDP per capita implies higher standard of living, we must see distributional aspect as well. If income inequalities exist in society. standard of living might not be higher for larger section of society. Further, higher real GDP per capital accompanied by degradation of environmental facilities would invariably compromise well being of people.