GUIDE FOR STUDENTS PREPARING THEIR RESPONSE – TASK 2 – ARTICLE 1BUS102 Introduction to Economics – Semester One 2016
DUE via Safe Assign 9am Wednesday 30th March
Economic Growth by John H. Cochrane is available at: http://faculty.chicagobooth.edu/john.cochrane/research/papers/cochrane_growth.pdf or
http://faculty.chicagobooth.edu/john.cochrane/research/papers/cochrane_growth.html
Access the article at one of the URLs given above and read the first four pages of it. Based on your reading of those pages, answer the questions in the spaces below. Use full sentences and show all necessary working but do not use more space than is given here. Other references are not necessary but, if you do use any (for example, online economics glossaries) please list at least the URL of your source. Marks are shown and total [15].
(1) Cochrane notes the very significantly different growth rates of the US between 1950 and 2000 and since 2000. Compare the effect of these two different growth rates on GDP if they were sustained over a period of 50 years. [3]
Identify the two different growth rates from Cochrane; use these figures and the compound growth formula to show what would happen to GDP over 50 years; state a conclusion.
(2) Cochrane states the GDP per capita of the US in 1952 and 2015 in 2009 dollars. What average real rate of growth of GDP per capita do the figures he gives imply? [3]
Identify the figures from Cochrane; set up an equation to be solved; find the answer by solving the equation or by trial and error.
(3) The growth rate of real GDP per capita is usually lower than the growth rate of real GDP. Why? Under what circumstances can it be the same or higher? [1]
Show the connection between GDP and GDP per capita; use that to explain why!
(4) Cochrane argues that the “average American” is far better off than in the 1950s than the figures for GDP suggest. What is his reasoning and do you agree? Why or why not? [4]
(5) What, according to Cochrane, is the ultimate source of economic growth, and what is the essence of what he thinks needs to be done to restore stronger growth? [4]
Questions (4) and (5) are much more open than the others. For the most part, you have to understand Cochrane’s arguments and express them clearly in your own words. 90 to 140 words for each question should be enough; do not exceed the space given or reduce the font size. 4 marks will be allocated for identifying the essence of the answer and expressing it clearly and without any errors; 3 for an answer that is mostly correct; 2 for an answer which covers some of the points but may be hard to follow; 1 for making some sort of start; 0 for a blank space or something that makes no sense at all to the marker.