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SolutionsCh1-5(partial) - ANSWERS TO END-OF-CHAPTER...

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ANSWERS TO END-OF-CHAPTER PROBLEMS CHAPTER 1 Quick Check 1. a. True. b. True. c. False. d. False/uncertain. The rate of growth was higher during the decade beginning in 1996 than during the previous two decades, but it is probably unrealistic to expect productivity to continue to grow at such a fast pace. e. False. There are problems with the statistics, but the consensus is that growth in China has been high. f. False. The European “unemployment miracle” refers to the relatively low European unemployment rate in the 1960s and the early 1970s. g. True. h. True. 2. a. More flexible labor market institutions may lead to lower unemployment, but there are questions about how precisely to restructure these institutions. The United Kingdom has restructured its labor market institutions to resemble more closely U.S. institutions and now has a lower unemployment rate than before the restructuring. On the other hand, Denmark and the Netherlands have relatively low unemployment rates while maintaining relatively generous social insurance programs for workers. In addition, some economists argue that tight monetary policy has at least something to do with the high unemployment rates in Europe. b. Although the Euro will remove obstacles to free trade between European countries, each country will be forced to give up its own monetary policy. Dig Deeper 3. a. The Chinese government has encouraged foreign firms to produce in China. Since foreign firms are typically more productive than Chinese firms, the presence of foreign firms has lead to an increase in Chinese productivity. The Chinese government has also encouraged joint ventures between foreign and Chinese firms. These joint ventures allow Chinese firms to learn from more productive foreign firms. b. The recent increase in U.S. productivity growth has been a result of the development and widespread use of information technologies. c. The United States is a technological leader. Much of U.S. productivity growth is related to the development of new technologies. China is involved in technological catch-up. Much of Chinese productivity growth is related to adopting existing technologies developed abroad. d. It’s not clear to what extent China provides a model for other developing countries. High investment seems a good strategy for countries with little capital, and encouraging foreign firms to produce (and participate in joint ventures) at home seems a good strategy for countries trying
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to improve productivity. On the other hand, the degree to which China’s centralized political control has been important in managing the pace of the transition and in protecting property rights of foreign firms remains open to question. 4. a. 10 years: (1.018) 10 =1.195 or 19.5 % higher 20 years: 42.9% higher 50 years: 144% higher b. 10 years: 31.8 % higher 20 years: 73.7 % higher 50 years: 297.8% higher c. Take output per worker as a measure of the standard of living.
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SolutionsCh1-5(partial) - ANSWERS TO END-OF-CHAPTER...

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