Macro CH. 12

When a society decides to increase its quantity of physical capital, the society

is in effect deciding to consume fewer good and services in the present

What increases productivity?

1: an increase in the physical capital stock per worker 2: an increase in human capital per worker an increase in natural resources per worker

If an American based firm opens and operates a new watch factory in Panama, then it is engaging in

Foreign direct investment

In the 1800s, Europeans purchased stock in American companies that used the fund to build railroads and factories, The European who did this engaged in

Foreign portfolio investment

What is considered a physical capital and what isn't?

IS 1: a new factory building 2: a computer used to help Mercury Delivery Service keep track of its orders 3: a desk used in an accountant's office NOT 1: on the job training

The equipment and structures available to produce goods and services are

Physical capital

the following is human capital

Understanding how to use a company's accounting software

If there are diminishing returns to capital, then

increases in the capital stock increase output by ever smaller amounts.

Other things equal, relatively poor countries tend to grow

faster than relatively rich countries, this is called the catch up effect

In determining living standards, productivity plays a key role

for both nations and individuals

Despite its status as one of the richest countries in the world, Japan

has few natural resources

Human capital is

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

All else equal, if there are diminishing returns then if a country raised its capital by 100 units last year and by 100 units this year

slower than relatively rich countries, this is called the fall-behind effect