16W-3 ( Key Question ) Assume a DVC and an IAC presently have real per capita outputs of $500 and $5,000 respectively. If both nations have a 3 percent increase in their real per capita outputs, by how much will the per capita output gap change? Rise in per capital output gap = $135 (= 3% x $5,000 - 3% x $500). 16W-5 ( Key Question ) Contrast the demographic transition view of population growth with the traditional view that slower population growth is a prerequisite for rising living standards in the DVCs. Demographic transition view: Expanded output and income in developing countries will result in lower birthrates and slower growth of population. As incomes of primary family members expand, they begin to see the marginal cost of a larger family exceeding the marginal benefit. The policy emphasis should therefore be on economic growth. Traditional view: Developing nations should reduce population growth as a first priority. Slow population growth enables the growth of per capita income.
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This note was uploaded on 07/14/2010 for the course ECON 1 taught by Professor Bergstrom during the Fall '07 term at UCSB.