Chapter 8: Economic Growth

Labor productivity can be calculated by:

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Governments in developing countries can hinder economic growth by:

A) pursuing policies that lead to high inflation. B) enforcing laws that inhibit the growth of the financial sector. C) promoting policies that tax exports.

Based on growth accounting which of the following would not cause an increase in output?

An Increase in interest rates.

Diminishing (marginal) returns to labor implies that:

As labor increases, output decreases.

Assuming a constant level of capital in the economy, a rapid increase in population is likely to:

B) raise real GDP, but lower real GDP per capita.

Real GDP per capita

Best way to compare GDP between countries of different population size

Real GDP Growth Rate

Best way to measure GDP Growth over time

Net investment is defined as:

C) the gross investment made in the economy less depreciation.

Governments in developing countries can promote economic growth by:

Creating the proper legal and economic environment

Rule of 70

Heuristic method of determining how long it will take to double your money at any rate of growth.

Saving

Income that is not consumed.

Capital Deepening

Increases in the stock of capital per worker.

Creative Destruction, the notion that innovation is promoted by the competitive desire to break production monopolies, can be traced back to:

Joseph Schumpeter

Technological Progress

More efficient ways of allowing organizing economic affairs that allow and economy to increase output without increasing inputs.

In growth accounting, the three sources of growth for a country are capital, labor and:

Technological Progress

Human Capital

The knowledge and skills acquired by a worker through education and experience and used to produce goods and services.

Convergence

The process by which poorer countries close the gap with richer countries in terms of real GDP per capita

Growth accounting

a method to determine the contribution to economic growth from increased capital, labor and technological progress.

new growth theory

modern theories of growth that try to explain the origins of technological progress.

labor productivity

output produced per hour of work.

creative destruction

the view that a firm will try to come up with new products and more efficient ways to produce product to earn monopoly profits.