Critical Thinking Questions


Demography can have important economic effects. The United States has an aging population. Explain one economic benefit and one economic cost of an aging population, as well as of a population that is very young.


Explain why is it difficult to set aside funds for investment when you are in poverty.


Why do you think it is difficult for high-income countries to achieve high growth rates?


Is it possible to protect workers from being fired without distorting the labor market?


Explain what will happen in a nation that tries to solve a structural unemployment problem using expansionary monetary and fiscal policy. Draw one AD/AS diagram, based on the Keynesian model, for what the nation hopes will happen. Then draw a second AD/AS diagram, based on the neoclassical model, for what is more likely to happen.


Why are inflationary dangers lower in the high-income economies than in low-income and middle-income economies?


Explain why converging economies may present a strong argument for limiting flows of capital but not for limiting trade.