Economics 11

Spring 2005

Due Friday March 11, 2005 Homework 7

Chapter 15 Unemployment

Problems and Applications: 6, 8

6. a. Bad weather would cause short term unemployment for construction workers, which would last until the weather improved.

b. This worker would be unemployed for a long time because there aren’t many other jobs in the area.

c. Stagecoach workers would be unemployed for a very long time since the railroad has replaced stagecoaches.

d. A short order cook would be unemployed for a short time. There are lots of restaurants, including the new one across the street.

e. The welder would be unemployed for a long period of time since her job has been made obsolete by technology and she doesn’t have much education so it is hard for her to learn new skills.

8. Firms in small towns have more power in hiring since there are fewer alternative job opportunities for workers compared to those in big cities.

Firms probably have less market power over hiring today than in the past since it is easier for people to find out where there are jobs in other communities. That means that workers have less need for unions, since it is much easier for workers to find better jobs.

Ch 12 Production and Growth: 1, 5, 8, 10, 11

1. The fact that countries import many goods and services yet must produce a large quantity of goods and services themselves to enjoy a high standard of living are reconciled by noting that there are substantial gains from trade. In order to be able to afford to purchase goods from other countries, an economy must generate income. By producing many goods and services, then trading them for goods and services produced in other countries, a nation maximizes its standard of living. That is, we need to export goods so we can import other goods.

5.a. If a nation reduced consumption and increased investment, economic growth would increase because there would be more savings, which is how we finance investment. With more investment, there are more capital goods and hence higher growth of GDP.

b. This change would benefit those people who work in industries producing capital goods and would hurt those who are in the production of consumption goods. But also remember that if the economy is growing faster, in the long run total GDP will be higher, so average incomes in the economy will be higher. With a rising standard of living, everyone benefits. Question: Would you rather be poor in Haiti or in the U.S.? Would you rather be middle class in India or the US?

8.a. A new auto plant is an example of foreign direct investment in the U.S.

b. US GDP will rise because there is more investment. Don’t worry about the effect on GNP, although the effect on GNP will be smaller than on GDP

10. Greater educational opportunities for women means the human capital of the workforce would be higher, which means more productive. In addition, better education for women means they have better access to information, such as health information, and they will experience better health outcomes. It also will lead to women having fewer babies, and therefore to lower population growth in the society. Women can then focus on the quality of care they are providing to children, rather than on the quantity of children they bring into the world.

11.a. Political stability could lead to strong economic growth by making the country attractive to investors. The increased investment would raise economic growth.

b. Strong economic growth could lead to political stability because when people have high incomes they tend to be satisfied with the political system and are less likely to overthrow or change the government.

No answers for these since there were so many different countries.

Please note: READ DIRECTIONS Many of you choose any country you wanted. The directions said to choose a developing (poor) nation. Some of you chose Canada, the Netherlands, Italy, Greece, and others. These are not poor countries.

Go to the CIA (on line, not in person) at http://www.odci.gov/cia/publications/factbook/

Pick any developing (ie poor) nation in the world and find the following data for that country and the US.

	My Country	US
1. Location (continent)
2. Population
3. Median Age
4. Population Growth Rate
5. Infant Mortality Rate
6. Life Expectancy at Birth
7. Literacy Rate Male
8. Literacy Rate Female
9. GDP per capita
10. Investment as % of GDP
11. Population Living in Poverty
12. 3 Main Occupations of Labor Force
13. Unemployment Rate
14. Electricity Consumption per capita (you will need to calculate this)
15. Telephones per person
16. Cell Phones per person
17. Type of Government