ECON 202: Exam 1 (Chapter 12)

False, that is not what it refers to.

(T/F) The catch-up effect refers to the idea that poor countries will never have high growth rates.

technological knowledge

An understanding of the best ways to produce goods and services is called A) human capital. B) physical capital. C) technological knowledge D) natural capital.

Human Capital

Greg learns how to bake from his grandmother. This is an example of A) human capital. B) technological knowledge. C) physical capital. D) natural resources.

human capital, but not technological knowledge.

Greg learns how to bake from his grandmother. This is an example of A) ​human capital, but not technological knowledge. B) ​technological knowledge, but not human capital. C) ​both human capital and technological knowledge. D) ​neither human capital nor technological knowledge.

foreign direct investment.

If an American-based firm opens and operates a new clothing factory in Honduras, then it is engaging in A) foreign portfolio investment. B) foreign financial investment. C) foreign direct investment. D) indirect foreign investment.

protect property rights and maintain political stability.

In order to promote growth in living standards, policymakers must A) create policies to enter the vicious circle. B) raise taxes to increase government revenue. C) invest less in human capital. D) protect property rights and maintain political stability.

Differences in growth rate.

Ranking of countries by income change substantially over time because of ...?

The poor country has a health epidemic such as the Zika virus.

Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain the failure of a poor country to catch up? A) The poor country uses a lot of resources to promote free trade policies. B) The poor country has a health epidemic such as the Zika virus. C) The poor country wasted resources fighting corruption. D) The poor country heavily invests in education.

real GDP per person and productivity in Eurnesia.

Suppose that a new government is elected in Eurnesia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. These changes will probably raise A) real GDP per person and productivity in Eurnesia. B) real GDP per person but not productivity in Eurnesia. C) productivity but not real GDP per person in Eurnesia. D) neither productivity nor real GDP per person in Eurnesia.

diminishing returns to capital.

The Production Function curve becomes flatter as the amount of capital per worker increases because of A) increasing returns to capital. B) increasing returns to labor. C) diminishing returns to capital. D) diminishing returns to labor.

natural resources

The inputs into production of goods and services that are provided by nature, such as land, rivers, and mineral deposits are called A) physical capital. B) natural resources. C) human capital. D) technological knowledge.

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 A) diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries. B) diminishing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries. C) increasing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries. D) increasing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.

-A threat to property rights -Revolutions and coups -Revolutionary government might confiscate the capital of some businesses -Domestic residents - less incentive to save, invest, and start new businesses -Foreigners - less incentive to invest

What are examples of political instability?

-Some flow back to the foreign capital owners -Increase the economy's stock of capital -Higher productivity -Higher wages -State-of-the-art technologies

What are some benefits from investments?

-Investment in human capital -Gap between wages of educated and uneducated workers -Opportunity cost: wages forgone -Conveys positive externalities -Public education - large subsidies to human-capital investment

What are some examples of education?

-Physical capital per worker -Human capital per worker -Natural resources per worker -Technological knowledge

What are the four determinants of productivity?

Property Rights

What are the prerequisite for the price system to work?

Diminishing Returns

What benefits from an extra unit of an input and declines as the quantity of the input increases?

Stock of equipment and structures and used to produce goods and services?

What is physical capital?

Living standard and varies widely from country to country.

What is the real GDP per person?

Growth Rate

What term is used to describe how rapidly real GDP per person grew in the typical year?

The knowledge and skills that workers acquire through education, training, and experience.

What's human capital?

Catch-Up Effect

What's it called when countries that start off poor tend to grow rapidly than countries that start off rich?

-The inputs into the production of goods and services and provided by nature, such as land, rivers, and mineral deposits?

What's natural resources?

Quantity of goods and services and produced from each unit of labor input.

What's productivity?

Society's understanding of the best ways to produce goods and services.

What's technological knowledge?

Foreign Direct Investment

What's the capital investment that is owned and operated by a foreign entity?

Foreign Portfolio Investment

What's the investment financed with foreign money but operated by domestic residents?

The things you have learned this semester

Which of the following is an example of human capital? A) The comfortable chair in your dorm room where you read economics texts B) The amount you get paid each week to work at the library C) The things you have learned this semester D) Any capital goods that require a human to be present to operate.