Consider two economies: A and B. Economy A is located close to the equator and is characterized by an extreme climate. The terrain in economy A is inhospitable and it lacks rivers or other water bodies in its territory

On the other hand, economy B is located in the temperate zone with a pleasant climate, fertile soil, and navigable rivers. Suppose the geography hypothesis of economic growth holds.
a) Which of the two economies is likely to be more prosperous?
b) Is the difference in prosperity between the two economies likely to be sustained in the long run?

The geography hypothesis claims that the differences in geography, climate, and ecology are ultimately responsible for the major differences in prosperity observed across the world.
a) If the geography hypothesis holds, economy A is likely to be less prosperous than economy B. This is because the productivity of different factors of production will be lower in economy A due to the extreme weather conditions and inhospitable terrain. The absence of rivers is likely to make transportation and trade expensive. On the other hand, economy B is characterized by geographical conditions that are conducive to development. Therefore, economy B is likely to be more prosperous in the long run.
b) Yes, the difference in prosperity is likely to be sustained in the long run. This is because the geography of a nation does not change over time and so, economy A is likely to be at a permanent disadvantage.

Economics

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If we observe an increase in real GDP and an increase in the price level after an increase in aggregate demand, we can conclude that

A) the aggregate supply curve is upward sloping. B) the aggregate supply curve is horizontal. C) the aggregate supply curve is vertical. D) the economy is now at full employment.

Economics

Which of the following statements is not correct?

a. The poverty line is an absolute level of income set by the federal government below which a family is considered to be in poverty. b. The poverty line is approximately equal to three times the cost of providing an adequate diet. c. The poverty line is adjusted annually to reflect changes in price levels. d. The poverty line is adjusted semiannually to reflect changes in fuel prices.

Economics