Critical Thinking Questions

11 . Use the demand-and-supply of foreign currency graph to determine what would happen to a small, open economy that experienced capital outflows.

Review Questions

12 . What is the primary way in which economists measure standards of living? 13 . What are some of the other ways of comparing the standard of living in countries around the world? 14 . What are the four other factors that determine the economic standard of living around the world? 15 . What other factors, aside from labor productivity, capital investment, and technology, impact the economic growth of a country? How? 16 . What strategies did the East Asian Tigers employ to stimulate economic growth? 17 . What are the two types of unemployment problems? 18 . In low-income countries, does it make sense to argue that most of the people without long-term jobs are unemployed? 19 . Is inflation likely to be a severe problem for at least some high-income economies in the near future? 20 . Is inflation likely to be a problem for at least some low- and middle-income economies in the near future? 21 . What are the major issues with regard to trade imbalances for the U.S. economy? 22 . What are the major issues with regard to trade imbalances for low- and middle-income countries?

Critical Thinking Questions

23 . Demography can have important economic effects. The United States has an aging population. Explain one economic benefit and one economic cost of an aging population as well as of a population that is very young. 24 . Explain why is it difficult to set aside funds for investment when you are in poverty. 25 . Why do you think it is difficult for high-income countries to achieve high growth rates? 26 . Is it possible to protect workers from losing their jobs without distorting the labor market? 27 . Explain what will happen in a nation that tries to solve a structural unemployment problem using expansionary monetary and fiscal policy. Draw one AD/AS diagram, based on the Keynesian model, for what the nation hopes will happen. Then draw a second AD/AS diagram, based on the neoclassical model, for what is more likely to happen. 28 . Why are inflationary dangers lower in the high-income economies than in low-income and middle- income economies? 29 . Explain why converging economies may present a strong argument for limiting flows of capital but not for limiting trade.

Problems

30 . Retrieve the following data from The World Bank database (http://databank.worldbank.org/data/ home.aspx) for India, Spain, and South Africa for the most recent year available:

• GDP in constant international dollars or PPP
• Population
• GDP per person in constant international dollars
• Mortality rate, infant (per 1,000 live births)
• Health expenditure per capita (current U.S. dollars)