[Related to Solved Problem #2] Fil in the missing blanks in the following table. Assume for simplicity that taxes are zero. National Income and $6,000 $7,000 $8,000 $9,000 $10,000 Consumption (C) Saving (S) $3,600 $4,200 $4,800 $5,400 $6,000 In the above example, the marginal propensity to consume is(Enter your response rounded to two dectmal places) In the above example, the marginal propensity to save isEnter your response rounded to thwo dectmal places.) Solution 1) Consumption +Saving = GDP S= GDP-C S= 6000-3600 = 2400 7000-4200=2800 8000-4800=3200 9000-5400 = 4600 10000-6000=4000 MPC = change in consumption / change in income = 600/1000 = 0.6 MPS=1-0.6 =0.4 2. C. The more the skilled worker in home country the beteer it is for economy 3. A. Thsi si because there is increase in inventory . People are spending less than they earn..

1. [Related to the Making the Connection] Economist Charles Kenny of the World Bank has
argued that: The process technologies-institutions like laws and inventory management systems-
that appear central to raising incomes per capita flow less like water and more like bricks. But
ideas and inventions-the importance of ABCs and vaccines for DPT-really might flow more
easily across borders and over distances. Source: Charles Kenny, Getting Better, New York:
Basic Books, 2011, p. 117. If Kenny is correct, these facts indicate that these low-income
countries OA will have a healthier and more productive labor force as there is significant
improvment in health, education, and civil and political liberties. OB. will have a healthier and
more productive labor force that will increase rapidly their rates of growth of real GDP per capita
in the decades ahead. Oc. will remain in their phase of stagnating growth and will never be able
to catch-up with the living standards with high-income countries. OD. will need a much lower
rate of economic growth to significantly close the gap in liwing standards with high-income
countries. As these countries become able to increase their standards of living, there OA. may be
an increase in income but higher rates of economic growth is needed for these countries to catch-
up with high-income countries. OB. will be a significant drop in the rate of economic growth
because these countries have very little growth in their incomes. Oc. may be a decline in income
and that will further lower the prospects of growth for these nations. OD. will be economic
growth but in order to have sustainable growth, these countries need their incomes to increase.
Solution
1. If Kenny is correct, these facts indicates that low income countries " will have a healthier and
more productive labor force as there is significant improvement in helath, education, civil and
political liberties".
Because it has been noticed that even most countries that have seen per capita income decline
over the past thirty years have seen health, education and civil rights observance considerably
improve. This is the greatest success of development.
Very cheap health technologies that can dramatically reduce mortality have spread rapidly across
the world. The proportion of the world’s infants vaccinated against diphtheria, pertussis and
tetanus –the DPT shot—climbed from one fifth to nearly four fifths between 1970 and 2006. And
ideas that save lives –wash your hands, don’t defecate in the fields you eat from—are
increasingly accepted.People around the world are also more ‘informed consumers’ than they
used to be.There is an increase in demand for education.Valuing ABCs and getting DPTs –these
are the forces behind global improvements in quality of life.
Option A is correct.
2. As these countries become able to increase their standards of living, there "may be an

2. increase in income but higher rates of economic growth is needed for theses countries to cath up
with high income countries."
Option A