Page 537 - The Principle of Economics

3. U.S. income per person today is roughly eight times what it was a century ago. Many other countries have also experienced significant growth over that period. What are some specific ways in which your standard of living differs from that of your great-grandparents?
4. The chapter discusses how employment has declined relative to output in the farm sector. Can you think of another sector of the economy where the same phenomenon has occurred more recently? Would you consider the change in employment in this sector to represent a success or a failure from the standpoint of society as a whole?
5. 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?
6. 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.
b. Describe some forms of government spending that represent consumption, and some forms that represent investment.
7. What is the opportunity cost of investing in capital? Do you think a country can “over-invest” in capital? What is the opportunity cost of investing in human capital?
Do you think a country can “over-invest” in human capital? Explain.
8. 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?
9. In the 1980s Japanese investors 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 Japanese investment than not to receive it?
b. In what way would it have been better still for Americans to have done this investment?
10. In the countries of South Asia in 1992, only 56 young women were enrolled in secondary school for every 100 young men. Describe several ways in which greater educational opportunities for young women could lead to faster economic growth in these countries.
11. 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?
CHAPTER 24 PRODUCTION AND GROWTH 551