What is the main reason behind the disparity in the growth rates ...

[james0929]

What is the main reason behind the disparity in the growth rates of South Korea and North Korea over the last sixty years?
 
  What will be an ideal response?

Question 2

According to economists who support passive policymaking
 
  A) expansionary policies can reduce unemployment without increasing the price level.
  B) policies that attempt to exploit the Phillips curve trade-off will eventually become ineffective for reducing unemployment.
  C) there is no difference between the effect of an anticipated change in aggregate demand and the effect of an unanticipated change in aggregate demand of an identical amount.
  D) workers always consider a change in nominal wages to be a change in real wages.

[macagn]

Answer to Question 1

Over the last sixty years, South Korea has been one of the fastest growing economies in the world while North Korea has almost stagnated. The main reason behind this difference is the type of institutions that exist in both countries. Resources in North Korea were allocated through central planning, private property was outlawed, and markets were banned. Therefore, the citizens of North Korea did not have any incentive to increase work effort and productivity. On the other hand, South Korea was a market-based economy that provided incentives to businesses for investment and industrialization and invested in the education of South Koreans. With the right incentives in place, investors and entrepreneurs in South Korea focus on investment and increasing economic activity, leading to economic growth.

Answer to Question 2

B

[james0929]

Gracias!

[Kedrick2014]

Thanks for the timely response, appreciate it