Question

CHAPTER 7 PRODUCTION AND GROWTH 161 ical formula over that 25-yesate of growth in International data show a positive correlation between income per person and the health of the population. a. Explain how higher income might cause better health outcomes. h. Explain how better health outcomes might cause higher income. c. How might the relative importance of your two hypotheses be relevant for public policy? 13. The great eighteenth-century economist Adam Smith wrote, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things." Explain how each of the three conditions Smith describes would promote economic growth 14. How large will Canada's GDP be in 25 years? The answer depends on what the rate of growth in GDP will be over that 25-year period. A mathemat- ical formula we can use for this calculation is the following: GDP 204 = GDP 13 (1 + 8) where GDP is the level of GDP in the year 2043, GDP is the level of GDP in the year 2018, and g is the rate of growth in GDP. Assume that GDP in 2018 is $1000 million and assume that the value of g is 0.035 (3.5 percent per year). What will be the value of GDP in 2043? Now suppose that the value of g is 0.040 (4.0 per- cent per year). What will be the value of GDP in 2043 given this slightly larger rate of growth? What does this result say about the importance of policies that promote even slightly faster rates of growth in GDP?

Answer 1

Due to presence of HOMEWORKLIB POLICY, I am answering first question.

12.

a.

Higher income might cause better health outcome due to following reasons:

• With higher incomes, people tend to have more income left after they spend on food and basic necessities.
• With more income left, they tend to spend more on sanitation, and keep check on health with improved focus on diet, medical checkups and physical workout.

b.

Better health outcomes might cause higher incomes due to following reasons:

• With better health, people tend to have improved mental health, energy levels and stamina which increases their capacity to do more work with greater efficiency.
• People tend to be aware of this cycle (health-income-health) and tend to focus on improving this cycle for life.

c.

Importance for public policy:

• Due to this available information, policy makers and government tend to focus more on improving and free provision of health services in each and every area specifically rural via various programmes to improve per capita income outcomes.

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