Author Question: Which of the following leads to an increase in real GDP? A) a decrease in the inflation rate in ... (Read 218 times)

sabina · **on:** Jun 29, 2018

Which of the following leads to an increase in real GDP?

A) a decrease in the inflation rate in other countries relative to the inflation rate in the United States
B) a decrease in interest rates
C) a decrease in government spending
D) Households have increasingly pessimistic expectations about future income.

Question 2

Refer to Table 22-7. Consider the statistics in the table above in describing the following industrialized and developing countries. Are these consistent with the economic growth model? Briefly explain.

What will be an ideal response?

shailee · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

These statistics combine industrialized countries with developing countries. The statistics in this table are not consistent with the predictions of the economic growth model. For example, Belgium, France, Canada and Denmark had much higher levels of real GDP per capita in 1960 than did Bangladesh, Honduras, and Bolivia. The economic growth model predicts that Belgium, France, Canada, and Denmark should have grown more slowly than Bangladesh, Honduras, and Bolivia. But the table shows that they grew much faster.