CECN 204 - Sample Mid-Term Exam 2

CECN 204 - Sample Mid-Term Exam 2 - 1.) Explanation of the...

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1.) Explanation of the meaning of economic growth and appropriate indicator? Explanation of six key institution structures that promoted economic growth in Canada with one example of each. Solution for 1 : Economic growth means the increase of per capita gross domestic product (GDP) or other measure of aggregate income. It is often measured as the rate of change in GDP. Economic growth refers only to the quantity of goods and services produced. Six key institutional structures promoting economic growth in Canada : 1. Foreign investments – help increase productivity and GDP. For example, Nestle a Switzerland originated food manufacturer opens a food processing plant in Canada. It will increase Canadian capital stock. 2. Education – it is an investment in the development of human capital. For example, schooling raises a person’s wage by an average of 10%. If a person earns more it will help increase saving which will then lead to increase in domestic investment. 3. Property rights – it is the ability to exercise authority over resources that are owned. For example, a mining company that owns a mine will be mining ores to benefit from the sales of those ores. This will help the mining company to increase capital stock and productivity of the country. 4. Free trade – the idea of free trade allows foreign investment and it helps increase net exports of the country. Increase in net exports means an increase in GDP, which is economic growth. For example, removing trade barriers such as tariffs promotes the idea of free trade by reducing the cost of trade among free trading countries. 5. Population control – rapid increase in population can reduce the per capita GDP of an economy, thus slowing economic growth. For example, promoting smaller family size means more income available for each individual and when income increases it helps increase savings which are then turned into investments. 6. Research and Development – finding ways to improve technology and better living standards is important for future economic growth. For example, a company investing in development of a machine that increases its productivity will help increase a country’s future capital stock.
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2.) Explanation of four arguments with examples in favour of desirability of economic growth and four arguments against the rapid economic growth, its uneven distribution and adverse effects with clear real life examples. Solution for 2 : Four positive effects of economics growth are income distribution, quality of life, resource depletion, environmental impact. Four arguments against economic growth are consumerism, a negative environmental impact, centralized management, and social justice. (Look at the explanation and examples below – Don’t use all of them just pick up one point from each) Positive effects of economic growth Income distribution Economist Xavier Sala-i-Martin argues that global income inequality is diminishing , [16] and the World Bank argues that the rapid reduction in global poverty is in large part due
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CECN 204 - Sample Mid-Term Exam 2 - 1.) Explanation of the...

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