ECO 210 - Chapter 7 Review

Real GDP per capita

-provides a rough estimate of a country's standard of living = real GDP/population

Rule of 70

-provides an estimate of the number of years for a value to double -# of years to double value = 70/growth rate

Capital-to-labor ratio

-the capital employed per worker -a higher ratio means higher labor productivity and as a result, higher wages

Infrastructure

-the public capital of a nation -includes transportation networks, power-generating plants and transmission facilities, public education institutions, and other intangible resources such as protection of property rights and a stable monetary environment

Real GDP

-the total value of final goods and serviced produced in a country in a year measured using prices in a base year -measured by the Bureau of Economic Analysis (BEA)

Economic growth

-usually measured by the annual percentage change in real GDP -reflecting an improvement in the standard of living

Catch-up effect

countries with smaller starting levels of capital experience larger benefits from increased capital, allowing these countries to grow faster than countries with abundant capital

Diminishing returns to capital

each additional unit of capital provides a smaller increase in output than the previous unit of capital

Productivity

how effectively inputs are converted into outpputs

Investment in human capital

improvements to the labor fore from investments in skills, knowledge, and the overall quality of workers and their productivity

Production function

measures the output that is produced using various combinations of inputs and a fixed level of technology

Compounding

the ability of growth to build on previous growth

Total factor productivity

the portion of output produced that is not explained by the number of inputs used in production