Why do small differences in the rate of economic growth produce large differences in the size of the economy over time? Illustrate with an example.
What will be an ideal response?
Small changes in the rate of growth can be very important. Over a period of time small changes are cumulative in the same way that compound interest payments are cumulative in a bank account. Using the rule of 70 to estimate the time it takes to double GDP, we can see that Nation A, whose growth rate is 3% takes 23 years to double its GDP, but Nation B whose growth rate is only 2% may take nearly 35 years to double its GDP.
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When good weather speeds the check-clearing process, float tends to ________ causing the Fed to initiate defensive open market ________
A) decrease; sales B) decrease; purchases C) increase; sales D) increase; purchases
Unintended costs that are imposed upon third parties as a result of an economic activity are called
a. marginal costs b. direct costs c. negative externalities d. positive externalities e. positive costs