1 The GI Bill provided educational opportunities to many you

1. The GI Bill provided educational opportunities to many young men returning from military   service. Using a production possibilities curve, demonstrate how the GI Bill affected economic growth and explain your answer.

2. Why is China still poor in per capita terms despite having the second-largest economy in the world in terms of real GDP?

3. Does the political freedom existing in democracies always aid economic grow

4. What is the relationship between savings, capital formation, and consumption?

5. According to Malthus, how do economic growth and population relate to each other?

Solution

1. Under the GI Bill, educational services are provided to the people who served in the armed forces to protect the nation. When educational opportunities are provided to young men returning from military service then, skills of these individuals improves which affects the earning of economy.

Growth refers to the increase in the per capita income of individuals while development refers to increase in per capita income, educational improvement, poverty reduction, improvement in health facilities, etc. Development is a wider concept than growth. Growth is just a part of development.

These young educated men who return from military service can generate new ideas to facilitate production. This GI Bill increases the earning of these young men\'s future income which results in growth of a nation.

Production possibility curve shows all possible combination of two goods which an economy can produce with its available resources at a given period of time. Growth of resources shifts the PPC curve rightwards. Increase in the earning of people increases their purchasing power.

Increase in the firm\'s factor of production in the form of land, labor or capital expands production possibility curve which indicates growth. So, in this case, number of educated people increases which increases factor of production i.e. labor.

Therefore, economic resources in the form of educated people increases which affects PPC curve and shifts it righwards.

2. Real GDP shows all value of goods and services produced in a year. Real GDP is in terms of goods and services rather than in money terms. Real GDP adjusted for inflation while, Nominal GDP does not adjusted for inflation.

Real GDP of a nation does not take into account the population of an economy it does shows total production of goods and services in the economy.

Per capita income of a nation is the ratio of total income earned by an economy in a year and number of population. Total income of China is high but due to high population size, per capita income of China\'s individual decreases. China is a country whose population is so huge which decreases its per capita income of an individual.

Due to these reasons, China has poor per capita income irrespective of second largest economy in the world in terms of real GDP.