ap_macro_CH25 - Page 99 1 The accompanying table shows data from the Penn World Table Version 6.1 for real GDP per capita in 1996 U.S dollars for

ap_macro_CH25 - Page 99 1 The accompanying table shows data...

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Solution Long-Run Economic Growth 1. The accompanying table shows data from the Penn World Table, Version 6.1, for real GDP per capita in 1996 U.S. dollars for Argentina, Ghana, South Korea, and the United States for 1960, 1970, 1980, 1990, and 2000. 99 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (1996 dollars) 1960 $7,395 ? ? $832 ? ? 1970 9,227 ? ? 1,275 ? ? 1980 10,556 ? ? 1,204 ? ? 1990 7,237 ? ? 1,183 ? ? 2000 10,995 ? ? 1,349 ? ? Year Percentage of 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (1996 dollars) Percentage of Argentina Ghana 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (1996 dollars) 1960 $1,571 ? ? $12,414 ? ? 1970 2,777 ? ? 16,488 ? ? 1980 4,830 ? ? 21,337 ? ? 1990 9,959 ? ? 26,470 ? ? 2000 15,881 ? ? 33,308 ? ? Year Percentage of 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (1996 dollars) Percentage of South Korea United States 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 $7,395 100% 67% $832 100% 62% 1970 9,227 125 84 1,275 153 95 1980 10,556 143 96 1,204 145 89 1990 7,237 98 66 1,183 142 88 2000 10,995 149 100 1,349 162 100 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (1996 dollars) Year Percentage of 1960 real GDP per capita 2000 real GDP per capita Real GDP per capita (1996 dollars) Percentage of Argentina Ghana chapter 8 25 macroeconomics economics KrugmanMacro_SM_Ch08.qxp 11/9/05 4:47 PM Page 99
b. South Korea experienced the greatest increase in living standards from 1960 to 2000; in 2001 it produced 1,011% ($15,881/$1,571 × 100) of what it produced in 1960. Argentina and Ghana experienced only a modest growth in living standards over the same period. Argentina’s path was less consistent than that of Ghana, where living standards remained low throughout the period. Compared with real GDP per capita in 1960, the United States in 2000 produced 268% ($33,308/$12,414 × 100) of what it produced in 1960. The growth in living stan- dards in Argentina, Ghana, and South Korea reflects the pattern for their different 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 educa- tion system, and substantial technological progress. Living standards grew more modestly in Argentina, as in other Latin American countries, because of low sav- ings and investment spending rates, underinvestment in education, political insta- bility, and irresponsible government policies. Although the growth in living stan- dards was similar in Ghana and Argentina, Ghana had started from a much lower level. Real GDP per capita in Ghana was only 11% of that in Argentina in 1960 and 12% in 2000. Living standards in Africa suffered from major political insta- bilities, poor education and infrastructure, and disease. 2. The accompanying table shows the average annual growth rate in real GDP per capi- ta for Argentina, Ghana, and South Korea using data from the Penn World Table, Version 6.1, for the past few decades.

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