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    Chapter 25 - Problem Set

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    Minh Anh
    This document contains 10 problems and applications related to production, growth, and international economics. It addresses topics such as foreign investment, education, health, political stability, and manufacturing employment. Some of the questions ask about reconciling facts, the effects of consumption vs investment on growth, opportunity costs of different types of capital, and correlations between income, health, and political stability. Policy implications are discussed for issues like education for women, health programs, and manufacturing employment.

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    Chapter 25 - Problem Set

    Uploaded by

    Minh Anh
    85 views2 pages
    This document contains 10 problems and applications related to production, growth, and international economics. It addresses topics such as foreign investment, education, health, political stability, and manufacturing employment. Some of the questions ask about reconciling facts, the effects of consumption vs investment on growth, opportunity costs of different types of capital, and correlations between income, health, and political stability. Policy implications are discussed for issues like education for women, health programs, and manufacturing employment.

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    Chapter 25_Problem set

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    This document contains 10 problems and applications related to production, growth, and international economics. It addresses topics such as foreign investment, education, health, political stability, and manufacturing employment. Some of the questions ask about reconciling facts, the effects of consumption vs investment on growth, opportunity costs of different types of capital, and correlations between income, health, and political stability. Policy implications are discussed for issues like education for women, health programs, and manufacturing employment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    85 views2 pages

    Chapter 25 - Problem Set

    Uploaded by

    Minh Anh
    This document contains 10 problems and applications related to production, growth, and international economics. It addresses topics such as foreign investment, education, health, political stability, and manufacturing employment. Some of the questions ask about reconciling facts, the effects of consumption vs investment on growth, opportunity costs of different types of capital, and correlations between income, health, and political stability. Policy implications are discussed for issues like education for women, health programs, and manufacturing employment.

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    Chapter 25: Production and Growth

    Problems and applications

    1. Most countries, including the United States, import substantial amounts of goods and
    services from other countries. Yet the chapter says that a nation can enjoy a high standard of
    living only if it can produce a large quantity of goods and services itself. Can you reconcile
    these two facts?
    2. Suppose that society decided to reduce consumption and increase investment.
    a. How would this change affect economic growth?
    b. What groups in society would benefit from this change? What groups might be hurt?
    3. Societies choose what share of their resources to devote to consumption and what share to
    devote to investment. Some of these decisions involve private spending; others involve
    government spending.
    a. Describe some forms of private spending that represent consumption and some forms that
    represent investment. The national income accounts include tuition as a part of consumer
    spending. In your opinion, are the resources you devote to your education a form of
    consumption or a form of investment?
    b. Describe some forms of government spending that represent consumption and some forms
    that represent investment. In your opinion, should we view government spending on health
    programs as a form of consumption or investment? Would you distinguish between health
    programs for the young and health programs for the elderly?
    4. What is the opportunity cost of investing in capital? Do you think a country can “overinvest”
    in capital? What is the opportunity cost of investing in human capital? Do you think a country
    can “overinvest” in human capital? Explain.
    5. Suppose that an auto company owned entirely by German citizens opens a new factory in
    South Carolina.
    a. What sort of foreign investment would this represent?
    b. What would be the effect of this investment on U.S. GDP? Would the effect on U.S. GNP
    be larger or smaller?
    6. In the 1990s and the first decade of the 2000s, investors from the Asian economies of Japan
    and China made significant direct and portfolio investments in the United States. At the time,
    many Americans were unhappy that this investment was occurring.
    a. In what way was it better for the United States to receive this foreign investment than not to
    receive it?
    b. In what way would it have been better still for Americans to have made this investment?

    1
    7. In many developing nations, young women have lower enrollment rates in secondary school
    than do young men. Describe several ways in which greater educational opportunities for
    young women could lead to faster economic growth in these countries.
    8. International data show a positive correlation between income per person and the health of
    the population.
    a. Explain how higher income might cause better health outcomes.
    b. Explain how better health outcomes might cause higher income.
    c. How might the relative importance of your two hypotheses be relevant for public policy?
    9. International data show a positive correlation between political stability and economic
    growth.
    a. Through what mechanism could political stability lead to strong economic growth?
    b. Through what mechanism could strong economic growth lead to political stability?
    10. From 1950 to 2000, manufacturing employment as a percentage of total employment in the
    U.S. economy fell from 28 percent to 13 percent. At the same time, manufacturing output
    experienced slightly more rapid growth than the overall economy.
    a. What do these facts say about growth in labor productivity (defined as output per worker) in
    manufacturing?
    b. In your opinion, should policymakers be concerned about the decline in the share of
    manufacturing employment? Explain.

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