China's current rate of GDP growth is quite rapid. Its current growth rate is probably three times that of the United States. However, the levels of pollution are much higher in China. Would you consider China to be better off than the United States
given this information? Why or why not?
What will be an ideal response?
China is not better off because of higher rates of growth of GDP. GDP is not a perfect measure of well-being. GDP is not adjusted for pollution or other negative effects of production. Certainly the rapid growth of GDP raises the standards of living of many in China. However, this comes at a cost of dirty air and water. According to the World Health Organization, seven of the ten most polluted cities in the world are in China. This pollution can result in negative health effects. The improvement in standards of living affect well-being in a positive manner, but the increased pollution has a negative effect on well-being. In addition, GDP per capita may be a better measure of standard of living rather than growth in GDP.
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To maintain a pegged rate, a nation faces a trilemma and must also:
A) generate extra export revenues. B) watch carefully to ensure imports and exports are equal. C) adjust its interest rates and money supply to ensure the home interest rate is equal to the foreign interest rate to prevent pressure on the exchange rate. D) restrict foreign capital inflows and domestic capital outflows.
Gasoline prices increase by 50 percent and other things remain the same. As a result, there is
A) an increase in the demand for gasoline. B) a decrease in the demand for gasoline. C) no change in the quantity of gasoline demanded. D) a decrease in the quantity of gasoline demanded. E) More information is needed to determine if the demand for gasoline increases or decreases.