AGEC 217 CH 7

GDP per capita

GDP divided by population

GDP per capita in the countries of Neverland and Everland are 2,000 and 500, respectively. This suggests that, other things being equal, the returns from capital investment would be:

Greater in Everland.

Long-run growth occurs when

an economy finds new resources.

A major role of government in promoting economic growth is to ensure that

an effective legal system is in place to enforce contracts and to protect property rights.

The ability to use resources in creative ways to produce goods and services is known as

entrepreneurial ability.

Economic growth is important to understand because

it is closely tied to standard of living.

Suppose a new island is discovered in the Atlantic Ocean and a new colony is created on that island with the production function output = f(A, L, K, H, N) = A × (L + K + H + N). If A equals 4, L and K each equals 5, and H and N each equals 15, then how much output would this new colony produce?

production function output = f(A, L, K, H, N) = A × (L + K + H + N) =4 * (5+5+15+15) =160

Which of these is NOT a source of productivity growth?

reducing immigration

The annualized percentage change in real GDP is 2.4%. What is the quarter-to-quarter percentage change in real GDP upon which this annualized rate was calculated?

0.6% The quarterly change in real GDP is 2.4%/4 = 0.6%.

The annualized percentage change in real GDP is 3.2%. What is the quarter-to-quarter percentage change in real GDP upon which this annualized rate was calculated?

0.8% The quarterly change in real GDP is 3.2%/4 = 0.8%.

Using the Rule of 70, how long does it take for a value to double if the growth rate is 7%?

10 years Number of years to double value = 70/growth rate = 70/7 = 10 years.

If instead the growth rate is 7%, the doubling time for the economy is

10years

Gerald can produce 128 toothpicks in an eight-hour workday. What is Gerald's labor productivity?

16 toothpicks per hour

Assume the U.S. economy increased about 0.8% quarter to quarter. What is the annualized percentage change in real GDP?

3.2% The annualized rate of change is 4 × 0.8% = 3.2%.

Assume the initial value of an investment is $1,000 and the growth rate is 20%. Using the Rule of 70, how many years will it take for the initial value to double?

3.5 years Number of years to double value = 70/growth rate = 70/20 = 3.5 years.

Suppose the growth rate of the economy is 2%. The size of the economy roughly doubles every

35 years

Which of the following scenarios would result in economic growth in the country of Everland?

GDP doubles while prices remain the same.

In June 2011, President Obama noted that foreign investment in the United States in 2010 was 49% higher than in 2009. He cited this as a key driver of an economic recovery. How might this also affect economic growth?

It means more capital for U.S. workers to use.

For living standards to rise, what must occur?

Output must grow faster than the population.

Suppose a new island is discovered in the Atlantic Ocean and a new colony is created on that island with the production function output = Output= f(A, L, K, H, N) = A × (L + K + H + N). If A equals 4, L and K each equals 5, and H and N each equals 15, then how much output per worker would this new colony produce?

Output per worker=A × (L/L + K/L + H/L + N/L). =4 (5/5+5/5+15/5+15/5) =32

Suppose a small business knows its production function output = A × f(L, K, H, N) = A × (L + K + H + N). The president of the company is wondering if having a new technology would help increase the total output. Previously, the company had a total output of 120, where L = 20, H = 20, K = 30, and N = 50. After the firm uses the new technology, where A = 2.5, its output rises to 300. Which of these statements is NOT true about this firm's production function?

The firm's output per worker = A × (L/L + K/L + N/L).

In April 2010, the New York Times reported on an analysis of census data showing that more immigrants to the United States were high-skilled workers working in white-collar jobs than were low-skilled workers working in low-wage jobs. Which statement best describes the likely impact of this on U.S. economic growth?

This is good for economic growth because not only are there more workers, but these workers will also be more productive.

Using the Rule of 70, how long does it take for a value to double if the growth rate is 12%?

about 5.8 years Number of years to double value = 70/growth rate = 70/12 = 5.8 years.

Which government policy might enhance labor force participation?

day care subsidies

Suppose that the GDP of California increases by 8.0% each year. How long will it take for the GDP of California to double? Round your answer to one digit after the decimal.

duration for California's GDP to double: Suppose that the GDP of Oregon today is exactly twice what it was 29 years ago. What was the average annual growth for Oregon over this time period? Round your answer to one digit after the decimal. average annual growth for Oregon:

When _____ is positive, it reflects an improvement in the standard of living.

economic growth

Which of these plays the MOST significant role in economic growth?

improvements in technology and ideas

Which of these is classified as labor?

mental and physical talents of people

The rule of 70

number of years to double = 70/growth rate

Suppose a new island is discovered in the Atlantic Ocean and a new colony is created on that island with the production function output = f(A, L, K, H, N) = A × ((L + K + H + N). If A equals 3, L and K each equals 7, and H and N each equals 14, then how much output per worker would this new colony produce?

production function output = f(A, L, K, H, N) = A × ((L + K + H + N). Output per worker=A × (L/L + K/L + H/L + N/L). 3(7/7 + 7/7 + 14/7 + 14/7) 18

Suppose a new island is discovered in the Atlantic Ocean and a new colony is created on that island with the production function output = f(A, L, K, H, N) = A × (L + K + H + N). If A equals 3 and L, K, H, and N each equals 7, then how much output would this new colony produce?

production function output = f(A, L, K, H, N) = A × (L + K + H + N). =3 * (7+7+7+7) =84

Which government policy might enhance labor force participation?

providing enhanced protections for pension funds

Government spending on _____ is considered a contribution to human capital.

public assistance subsidizing student loans

Economic growth is most accurately measured by changes in which variable?

real GDP

Which of these is the primary explanation for the extraordinary economic growth the United States has enjoyed over the past century?

technological advancements

Government spending on _____ is considered a government contribution to physical capital.

telecommunications networks

Government spending on _____ is considered a contribution to physical capital.

transportation networks

_____ refer(s) to the ability of firms to open and close businesses without unnecessary restrictions or other burdens.

Competitive markets

Suppose a new island is discovered in the Atlantic Ocean and a new colony is created on that island with the production function output = Output= f(A, L, K, H, N) = A × (L + K + H + N). If A equals 4, L and K each equals 5, and H and N each equals 15, then how much output per worker would this new colony produce?

Output per worker=A × (L/L + K/L + H/L + N/L). =4 * (5/5 +5/5+ 15/5+15/5) =32

Jill can produce 14 toothpicks in two hours. Georgina can produce six toothpicks in two hours. Wanda can produce 20 toothpicks in four hours. Sammy can produce 30 toothpicks in five hours. Who has the highest labor productivity?

Labor productivity = output/labor hours Jill 14/2=7 Georgina 6/2=3 Wanda 20/4=5 sammy 30/5=6 Jill has highest labor productivity

Creating a new technology that makes production line workers more efficient is likely to produce _____ growth.

long-run

_____ leads to lower poverty rates and longer life expectancies as people can afford better medical care, more nutritious diets, and more leisure to reduce stress. Please choose the correct answer from the following choices, and then select the submit answer button.

Economic growth

_____ is the measure used to gauge the ability of individuals and businesses to make investment and production decisions freely.

The Index of Economic Freedom The Index of Economic Freedom measures the ability of individuals and businesses to make investment and production decisions freely.

_____ is growth building on previous growth.

Compounding Compounding is growth building on previous growth. The power of compounding can turn small rates of growth into substantial increases.

Using the Rule of 70, how long does it take for a value to double if the growth rate is 8%?

about 8.75 years Number of years to double value = 70/growth rate = 70/8 = 8.75 years.

Which of these is a source of productivity growth?

increasing the capital-to-labor ratio

In September 2010, President Obama talked about a plan to spend more on U.S. infrastructure. Which of these would NOT be included in such a plan?

increasing the number of U.S. Border Patrol agents