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__172.20.40.61_Materials_hjackson-0011_Krug2e_Macro_PS_Ch09

__172.20.40.61_Materials_hjackson-0011_Krug2e_Macro_PS_Ch09...

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Solution S-117 chapter: Long-Run Economic Growth 1. The accompanying table shows data from the Penn World Table, Version 6.2, for real GDP per capita in 2000 U.S. dollars for Argentina, Ghana, South Korea, and the United States for 1960, 1970, 1980, 1990, and 2000. a. Complete the table by expressing each year’s real GDP per capita as a percentage of its 1960 and 2000 levels. b. How does the growth in living standards from 1960 to 2000 compare across these four nations? What might account for these differences? 1. a. The accompanying table shows each nation’s real GDP per capita in terms of its 1960 and 2000 levels. 1960 $1,458 100% 9% $12,892 100% 38% 1970 2,552 175 16 17,321 134 50 1980 4,497 308 29 21,606 168 63 1990 9,593 658 61 27,097 210 79 2000 15,702 1,077 100 34,365 267 100 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (2000 dollars) Year Percentage of 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (2000 dollars) Percentage of South Korea United States 1960 $7,838 100% 69% $412 100% 30% 1970 9,821 125 87 1,052 255 76 1980 10,921 139 96 1,142 277 82 1990 8,195 105 72 1,153 280 83 2000 11,332 145 100 1,392 338 100 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (2000 dollars) Year Percentage of 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (2000 dollars) Percentage of Argentina Ghana 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (2000 dollars) 1960 $7,838 ? ? $412 ? ? $1,458 ? ? $12,892 ? ? 1970 9,821 ? ? 1,052 ? ? 2,552 ? ? 17,321 ? ? 1980 10,921 ? ? 1,142 ? ? 4,497 ? ? 21,606 ? ? 1990 8,195 ? ? 1,153 ? ? 9,593 ? ? 27,097 ? ? 2000 11,332 ? ? 1,392 ? ? 15,702 ? ? 34,365 ? ? Year Percentage of 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (2000 dollars) Percentage of 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (2000 dollars) Percentage of 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (2000 dollars) Percentage of Argentina Ghana South Korea United States 9 25 ECONOMICS MACROECONOMICS S117-S128_Krug2e_Macro_PS_Ch09.qxp 2/25/09 8:01 PM Page S-117
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Solution b. South Korea experienced the greatest increase in living standards from 1960 to 2000; in 2000 it produced 1,077% ($15,702/$1,458 × 100) of what it produced in 1960. Argentina experienced only a modest growth in living standards over the same period, and Argentina’s path was less consistent than that of Ghana. Compared with real GDP per capita in 1960, the United States in 2000 produced 267% ($34,365/$12,892 × 100) of what it produced in 1960. The growth in living standards in Argentina, Ghana, and South Korea reflects the pattern for their dif- ferent regions of the world. South Korea, like many other East Asian countries, had high productivity growth because of high savings and investment rates, a good edu- cation system, and substantial technological progress. Living standards grew more modestly in Argentina as in other Latin American countries, because of low savings and investment spending rates, underinvestment in education, political instability, and irresponsible government policies. Ghana had started from a much lower level than Argentina but has made some progress. Real GDP per capita in Ghana was only 5% of that in Argentina in 1960 but was 12% in 2000. Living standards in Africa suffered because of major political instabilities, poor education and infra- structure, and disease.
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