QUESTION 10 Country A has real GDP per person of 100000 whil

QUESTION 10 Country A has real GDP per person of 100,000 while country B has real GDP per person of 200,000. All else constant, country A will eventually have a higher standard of living than country B if a. the level of saving per person is 10,000 in country A and 10,000 in country B b. the level of saving per person is 12,000 in country A and 15,000 in country B. c.Both of the above are correct. d. None of the above are correct. QUESTION 11 GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result, a. U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller amount. b.U.S. investment increases, but GDP and GNP are unaffected by the purchase. c. U.S. investment, GDP, and GNP all increase by the same amount d. U.S. investment and GNP increase by the same amount, but U.S. GDP increases by a smaller amount.

Solution

1. None of the above is correct. A country can have a higher standard of living, which is measured on the basis of per capita income. Here, country B clearly has a higher per capita income. Although, savings rate can be used to increase the capital stock in the long run period. But, that does not comment on the standard of living. It only means that in the growth process a country with higher savings rate can grow at a faster rate and attain a higher standard of living. Which is clearly not the case.

2. 1st option is correct.

This is because the addition will be an investment and it will add to our GDP. But, it will get deducted from the GNP as the Swedish firm will take the profit to home. But, the effect will be less as it has paid wages to workers in USA.

3. FROM THE POINT ON X AXIS.

WE SEE WHEN HE IS CONSUMINHG ALL X HE IS USING 60 UNITS.

SINCE THE PRICE IS 5. AT THE POINT HE IS EXHAUSTING ALL THE INCOME.

SO, THE INCOME WILL BE 60*5=300