Chapt 25 Econ 2

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year?

2 %

Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic growth?

Nutrition

Industrial machinery is an example of

a factor of production that in the past was an output from the production process.

Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity

more in the short run than in the long run. Productivity = GDP, and increased savings increases GDP, but less so in long run.

Last year real GDP per person in the imaginary nation of Olympus was 4,250. The year before it was 4,100. By about what percentage did Olympian real GDP per person grow during the period?

3.7 %

Country A had a population of 1,000, of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0. Who had the higher real GDP and who had the higher real GDP per person?

Country B had the higher level of real GDP and real GDP per person.

What is catch-up growth?

In one generation, China will become one of the richest countries if China's GDP per person continues to grow at 9% per year.

The one variable that stands out as the most significant explanation of large variations in living standards around the world is

Productivity

Which of the following can be measured by the level of real GDP per person?

The standard of living but not productivity

In an economy where net exports are zero, if saving rises in some period, then in that period

consumption falls and investment rises. B/c consumption and savings/investment are oppositely related but investment does equal savings.

A policy that increases saving will

improve economic growth and health outcomes.

The traditional view of the production process is that capital is subject to

diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.

The traditional view of the production process is that capital is subject to

diminishing returns.

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will

fall and remain lower for a long time.

In recent decades, Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in

foreign portfolio investment.

Suppose Japanese-based Toshiba Corporation builds and operates a new computer factory in the United States. Future production from such an investment will

increase U.S. GDP more than it increases U.S. GNP. B/c GNP is total income earned by permanent residents, while GDP is total income is of everyone in the economy, regardless of their nationality.

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should

lend support to the invisible hand by maintaining property rights and political stability.

Educational attainment tends to be

low in countries with high population growth.

Educated people may generate ideas that increase production. These ideas

produce a return to society from education that is greater than the return to the individual.

In order to promote growth in living standards, policymakers must

protect property rights and maintain political stability .

If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity

rises but real GDP per person falls. B/c productivity is the quantity of goods and service produced from each unit of labor input (less shitty workers in the workforce), yet overall GDP falls b/c less workers.

An understanding of the best ways to produce goods and services is called

technology