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Economic Growth in the European Union

Economic Growth in the European Union - Aplia Inc...

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Unformatted text preview: Aplia Inc.: Assignments Page 1 of 1 Economic Growth in the European Union Contents Due Wednesday 02.06.08 08:00 PM | Grade< «2f 1. According to the accompanying news article, per capita GDP in EU member countries is equal to what fraction of GDP per capita in the United States? {it A. 72% if“ B. 2% £1": c. 0.5% {if D. 67% The fourth paragraph in the news article quotes the European Commission's report, saying that withou substantial improvements ”the Union cannot catch up on the United States, as our per capita GDP is 71 per cent of our American partner‘s." Aplia Inc.: Assignments Page 1 of 1 Economic Growth in the European Union Contents Due Wednesday 02.06.08 08:00 PM l Grade( The "employment rate" equals the number of workers divided by the total population between the ages of and 65. The employment rate is always less than 100% for many reasons. Some people do not work because they are in school after age 15. Others retire before they are 65. Many people do not work in the marketplace because of family care responsibilities. Economists categorize all of these types of people as "not in the lal force." Other people may be looking for work, which means that they are in the labor force, but unable to find aj They are categorized as "unemployed." Aplia Inc.: Assignments Page 1 of 1 Economic Growth in the European Union Contents Due Wednesday 02.06.08 08:00 PM | Grade 3' 2. According to the accompanying news article, what is the target employment rate for the EU for the yes 2005? ‘ if“ A. 45% if} B. 74% f“? c. 50% C D. 67% The accompanying news article says that “Europe’s low employment rate, especially among workers as over 55, is described as 'worrying indeed‘, whiie it is deemed unlikely that the EU will meet its employment rate target of 67 per cent by 2005." Aplia- Inc.: Assignments ' Page 1 of 1 Economic Growth in the European Union Contents Due Wednesday 02.06.08 08:00 PM l Gradet GDP per capita is equal to the total output of goods and services produced in a nation, divided by the num of people who live in the nation. A useful way to understand the behavior of GDP per capita is to write it a the product of three fractions: ‘ GDP GDP Workers People Aged 15 to 65 Population _ Workers X People Aged 15 to 65 X Total Population The first fraction on the right side of the equation, GDP per worker, is called "labor productivity," or "productivity” for short. The second fraction, the number of workers divided by people of working age, is t employment rate. The third fraction represents the working age population as a share of the total populati Stated in words, the equation says that GDP per capita is equal to labor productivity times the employmer rate times the fraction of the working age population. Thus, GDP per capita will increase when one or mon these ratios increase. Aplia 1110.: Assignments Page 1 of 1 Economic Growth in the European Union Contents > Due Wednesday 02.06.08 08:00 PM | Grade Use the equation for GDP per capita, which is repeated here, to answer the following questions. GDP GDP Workers People Aged 15 to 65 Population _ Workers X PeopleAged 15t0 65 X Total Population Recall that in words, the equation says that GDP per capita equals labor productivity times the employmer rate times the working age share of the population. J 3.1. True or False: An increase in the employment rate, with no change in productivity and no change in fraction of the population that is of working age, will increase GDP per capita. {3‘ True {7 False The equation shows you that if the employment rate increases and the other two fractions remain th same, GDP per cap§ta increases. Intuitively, the equation also telts you that to have more goods and services per person, a nation ne more workers per person or more goods and services per worker. Increasing the employment rate is way to achieve more workers per person‘ Another way would be to increase the fraction of the popu that is of working age, but there is littie a government can do to change the age structure of its popuiation. Aplia Inc.: Assignments _ Page 1 of 1 Economic Growth in the European Union Contents ' Due Wednesday 02.06.08 08:00 PM | Grade( Use the equation for GDP per capita, which is repeated here, to answer the following questions. GDP GDP Workers People Aged 15 to 65 Population _ Workers X PeopleAged 15to 65 X Total Population Recall that in words, the equation says that GDP per capita equals labor productivity times the employmer rate times the working age share of the population. gt: 3.2. True or False: If there is no increase in the employment rate in the EU, there will be no growth in GE capita in the EU region. {3 True ‘55 False Even if there is no change in the employment rate, GDP per capita can increase if labor productivity output per worker) increases. Aplia Inc.: Assignments Page 1 of 1 Economic Growth in the European Union Contents Due Wednesday 02.06.08 08:00 PM | Grade Use the equation for GDP per capita, which is repeated here, to answer the following questions. GDP GDP Workers People Aged 15 to 65 Population _ Workers X People Aged 15 to 65 X Total Population Recall that in words, the equation says that GDP per capita equals labor productivity times the employmer rate times the working age share of the population. J 3.3. Assume that government pension policy encourages all workers over the age of 65 to retire. Conside what would happen if the share of a nation's population that is of working age (15 to 65) decreases because people live longer, causing the fraction of people over age 65 to increase. True or False: In this case, if labor productivity and the employment rate remain constant, GDP per will decline. {3" True if“? False Under these assumptions, the above equation shows that a nation‘s GDP per capita will fall. This giv« an important insight into the possible future of nations that have rapidly aging populations, such as : Italy, and Japan. As the population ages, there are fewer people working relative to the population a whole. Fewer workers per capita lead to lower GDP per capita. Aplia Inc.: Assignments Page 1 of 1 Contents Due Wednesday 02.06.08 08:00 PM 1 Grade $5? 4. True or False: Productivity growth rates in the EU are below the US. productivity growth rate. 5? True {W False A paragraph in the middle of the accompanying news article states that productivity growth rates in th EU have fallen since the mid~19905 and are currently fluctuating between 0.5% and 1% per year. Productivity growth in the United States is currently at 2% per year. Aplia Inez Assignments Page 1 of 1 Economic Growth in the European Union Contents Due Wednesday 02.06.08 08:00 PM I Grade« 32” 5. Which of the following statements correctly describes the relationship between the level of GDP per ca; and economic growth? {3?- A. None of these statements are correct. C B. High GDP per capita implies a high growth rate of GDP per capita. C C. Slow productivity growth implies that GDP per capita will decrease. C D. Low GDP per capita implies a low growth rate of GDP per capita. The slow growth in productivity in EU member countries does not mean that GDP per capita will decrez If the employment rate and the fract§on of the population that is of working age remain constant, then any productivity growth will lead to some growth in GDP per capita. A country with a low current level of GDP per capita may be growing rapidfy, growing slowty, or even shrinking. China has a low and rapidly growing GDP per capita, while Zimbabwe has a low and decreas GDP per capita. Likewise, a country with a high current level of GDP per capita doesn’t necessarily hav high growth rate of GDP per capita. ...
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