You are about to read a short case detailing economic development between East a

Question

You are about to read a short case detailing economic development between East and West Germany following the fall of the Berlin Wall. Despite reuniting in 1989, there are stark differences between the two countries in their levels of economic development and standards of living. East Germany’s lower level of economic development is a legacy of its time under communist rule. You will be asked to answer questions linking your knowledge from the chapter to the situation detailed in the case.

Review the text material on types of national differences in economic development, and then read the following short case. When you have finished reading the case, answer the questions below.

In 1987, then U.S. President Reagan implored Soviet leader Mikhail Gorbachev to tear down the wall separating East and West Germany. The wall, known as the Berlin Wall, had been erected in 1961 in an effort to stop East Germans from leaving the country. In addition to being a physical barrier between the Eastern and Western territories of what had before been a single nation, the Berlin Wall also served as a clear divider of economic and political ideals. In West Germany, a democracy and market economy prevailed, while in communist-led East Germany a very different political and economic reality existed.

When the Berlin Wall was dismantled in 1989, the differences between the two political and economic ideals and their implications for the countries involved were revealed. While West Germany had prospered and developed economically, East Germany’s economy had stagnated. In West Germany, citizens enjoyed a standard of living that was much higher than their East German counterparts.

Now, over 25 years later, these differences continue to exist, raising the question of whether East Germany can ever catch up to West Germany. For example, according to the German Federal Labor Office, unemployment in the former East Germany is consistently running over 9 percent while in the former West German territories, unemployment is generally less than 6 percent. Similarly, income levels in the former West Germany are higher than those in the former East Germany. Per capita income in East Germany is just 84 percent of per capita income in West Germany.

Today, in the reunited Germany citizens move freely back and forth between the formerly divided territories and a shared economic and political agenda exists. However, the legacy of the years that East Germany spent under communist rule is evident. While the West continues to thrive, East Germany continues to struggle. Indeed, many West Germans lament the fact that their tax dollars are used to support East Germans. Perhaps more troubling, though, is that as more young people from East Germany leave the region in search of better opportunities, the chance that East Germany will ever “catch up” with West Germany continues to decline.

If the level of economic development in the former West Germany is higher that the level of economic development in the former East Germany, then which of the following is likely to occur?

a the share of total economic activity will rise

b the population in west germany territories will increase

c the east german territories will be a lucrative market for consumer goods

d there will be a decline in total economic activity

Based on the information in the case, which statement is true?

A)

Capitalism and a market economy are associated with greater economic progress

B)

The benefits of reunification have been shared relatively equally between West Germany and East Germany.

C)

Economic aid in the form of tax subsidies is effective at creating development.

D)

A totalitarian society is beneficial for everyone except the less educated sector.

A)

Capitalism and a market economy are associated with greater economic progress

Explanation / Answer

If the level of economic development in the former West Germany is higher that the level of economic development in the former East Germany, then which of the following is likely to occur?

b the population in west germany territories will increase

Based on the information in the case, which statement is true?

A)

Capitalism and a market economy are associated with greater economic progress

A)

Capitalism and a market economy are associated with greater economic progress

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