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# Challenge Questions for Economics

QUESTION 1

Compare a hypothetical DVC with a hypothetical IAC. In the DVC, average per capita income is \$500 per year. In the IAC, average per capita income is \$40,000 per year. If both countries have a savings rate of 10 percent per year, the amount of savings per capita in the DVC will be \$ ________per person per year, while in the IAC it will be \$_____per person per year.

QUESTION 2

Suppose it takes a minimum of 5 units of food to keep a person alive for a year, the population can double itself every 10 years, and the food supply can increase every 10 years by an amount equal to what it was in the beginning (year 0).

a) Assume that both the population and the food supply grow at these rates. Complete the following table by computing the size of the population and the food supply in years 10 through 60.

 Year Food Supply Population 0 200 20 10 20 30 40 50 60

Instructions: Enter values in the blanks below from left to right as you move down each column.

Food Supply:

a.

b.

c

d.

e.

f.

Population:

a.

b.

c.

d.

e.

f.

b) In the 30th year does the food supply meet the needs of the population? (Yes/No)

c) In the 40th year, is there enough food to meet the needs of the population? (Yes/No)

d) In year 50, what would the size of the population need to be in order to not run out of food? _______?______ people

e) In year 60, what would the size of the population need to be in order to not run out of food? ______-?_______people

QUESTION 3

Assume that a very tiny and very poor DVC has income per capita of \$300 and total national income of \$3.3 million.

a)How large is its population?

b)If its population grows by 3 percent during the year while its total income grows by 5 percent, what will be its new income per capita rounded to full dollars?

\$_____?_______

c)If population had not grown during the year, but income did still grew by 5%, what would have been its income per capita?

\$____?_______

QUESTION 4

Assume a DVC and an IAC currently have real per capita outputs of \$2,000 and \$20,000, respectively. Furthur assume that both nations have a 2 percent increase in their real per capita outputs.

Instructions: Enter all values as whole numbers.

a)Assume that both nations have a 2 percent increase in their real per capita outputs. Calculate the new level of real per capita output for each country.

i) DVC: \$ _____?______

ii) IAC: \$____?_______

c)Calculate the output gaps.

i) Before growth: \$_____?_______

ii) After growth: \$______?_______

d)By how much did the output gap change? \$_____?________

QUESTION 5

Watch video on youtube of Hans Rosling Donâ€™t Panic and answer questions below.

a) What is the current “pin code” of the world? _____?__________