Special interest group Q receives a 1\10,000^th slice of the economic pie. Its net benefit from either an economic growth policy or a transfer policy is $50,000. In order for group Q to be indifferent between the two policies, the economic growth policy would have to make the size of the economic pie (Real GDP)grow by _________________. This type of analysis is used to show that special interest groups tend press government for ______________ instead of ________________.

Question

Quizplus · Accepted Answer

To find the required increase in Real GDP for group Q to be indifferent between the two policies, we can use the formula: Net Benefit/Share of Economic Pie = Increase in Real GDP Substituting the given values, we get: $50,000/(1/10,000^th) = x Solving for x, we get: x = $500,000,000 Therefore, the economic growth policy would have to make the size of the economic pie (Real GDP) grow by $500,000,000 for group Q to be indifferent between the two policies. This type of analysis is used to show that special interest groups tend to press government for transfers instead of economic growth, as the required increase in Real GDP for the economic growth policy to be preferred is often much larger than the benefits they would receive from transfer policies.

Special Interest Group Q Receives a 1\10,000th Slice of the Economic

Special Interest Group Q Receives a 1\10,000^th Slice of the Economic