What is the main difference between classical economists' ideas about economic growth versus what modern evidence suggests?
What will be an ideal response?
Classical economists assumed that as real GDP per person rises, the population growth rate increased. But, contrary to this assumption, the data show that population growth rate is approximately independent of the economic growth rate. Classical economists concluded that the increase in population, which increases labor supply, would drive real GDP per person back to the subsistence level. But the data show that in advanced nations real GDP per person is well above the subsistence wage rate.
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Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury?
A) D decreases, S no change, P and Q decrease. B) S decreases, D no change, P increases, Q decreases. C) D and S decrease, P and Q decrease. D) D no change, S increases, P decreases, Q decreases.
The figure below shows the U.S. market for imported wine. For simplicity, we consider export supply curves to be flat. Chilean wine is available for $480 per barrel and French wine is available for $420 per barrel.
Suppose the United States has a tariff of $80 per barrel on imported wine. Then, the United States joins a free-trade area with Chile. What will be the change in the net national surplus after the United States enters into a free-trade agreement with Chile?
A. -$970 million B. -$50 million C. +$50 million D. +$250 million