Question 12.6

2. Argentina used to be as rich as Canada; now it’s much poorer. Does this mean that Argentina is poorer than it was in the past? Explain.

No, Argentina is not poorer than it was in the past. Both Argentina and Canada have experienced long-run growth. However, after World War II, Argentina did not make as much progress as Canada, perhaps because of political instability and bad macroeconomic policies. Canada’s economy grew much faster than Argentina’s. Although Canada is now about three times as rich as Argentina, Argentina still had long-run growth of its economy.