Chapter 12: Production and Growth

our productivity because our income is equal to what we produce.

Our standard of living is most closely related to

Japan, the United Kingdom

Over the past century, ________ has experienced particularly strong growth, and ________ has experienced particularly weak growth.

2, 35

Over the past century, real GDP per person in the United States has grown about _____ percent per year, meaning it has roughly doubled every _____ years.

real income per person.

A reasonable measure of the standard of living in a country is

Growth in the long run

Because capital is subject to diminishing returns, higher saving and investment do not lead to higher

they save and invest an unusually high percentage of their real income.

China, Japan, and Brazil are growing very quickly because

a nonrenewable natural resource.

Copper is an example of

labor

For a given level of technology, we should expect an increase in labor productivity within a nation when there is an increase in each of the following except

in the future, U.S. GDP will rise more than U.S. GNP.

If Mazda builds a new plant in Illinois,

doubling all of the inputs doubles output.

If a production function exhibits constant returns to scale,

3.1 percent

If real income per person in 2018 is $18,073 and real income per person in 2019 is $18,635, what is the growth rate of real income over this period?

increase, productivity

Increases in the amount of human capital in the economy tend to ________ real incomes because they increase the ________ of labor.

Foreign Direct Investment

Investment made by a foreign company in the economy of another country.

human capital

Madelyn goes to college and reads many books while at school. Her education increases which of the following factors of production?

not concerned, fall

Most economists are ________ that natural resources will eventually limit economic growth. As evidence, they note that the prices of most natural resources, adjusted for overall inflation, have tended to ________ over time.

it may be harder for it to grow quickly because of the diminishing returns to capital.

Once a country is wealthy,

a reduction in current consumption.

The opportunity cost of growth is

10

The world's rich countries, such as the United States and Germany, have income per person that is about _____ times income per person in the world's poor countries, such as Pakistan and India.

an ever-increasing population is constrained only by the food supply, resulting in chronic famines.

Thomas Malthus argued that

put stress on the economy's ability to produce food, dooming humans to remain in poverty

Thomas Robert Malthus believed that population growth would

nationalize major industries.

To increase growth, governments should do all of the following except

it has the potential to grow relatively quickly due to the "catch-up effect."

When a nation has very little income per person,

GDP and GNP both rise but GDP rises by more

When the Japanese car maker Toyota expands one of its car factories in the United States, what is the likely impact of this event on the gross domestic product and gross national product of the United States?

A farmer discovers that it is better to plant in the spring rather than in the fall.

Which of the following describes an increase in technological knowledge?

Susan pays her college tuition.

Which of the following expenditures to enhance productivity is most likely to emit a positive externality?

increase restrictions on the importing of Japanese automobiles and electronics

Which of the following government policies is least likely to increase growth in Africa?

Toyota buys stock in Ford, and Ford uses the proceeds to build a new plant in Michigan.

Which of the following is an example of foreign portfolio investment?

Countries have great variance in both the level and growth rate of income per person; thus, poor countries can become relatively rich over time.

Which of the following statements is true?

a. There is no evidence yet that rapid population growth stretches natural resources to the point that it limits growth in productivity. b. Rapid population growth may dilute the capital stock, lowering productivity. c. Rapid population growth may promote technological progress, increasing productivity. d. All of the above are true. ALL are True

Which of the following statements regarding the impact of population growth on productivity is true?

technological knowledge

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

Property Rights

the ability of people to exercise authority over the resources they own.

Brain Drain

the emigration of many of the most highly educated workers to rich countries, where these workers can enjoy a higher standard of living

Externality

the impact of one person's actions on the well-being of a bystander

Natural Resources

the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits

human capital

the knowledge and skills that workers acquire through education and on-the-job training

Catch-up Effect

the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich

Diminishing Returns

the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases

Productivity

the quantity of goods and services produced from each unit of labor input

Physical Capital

the stock of equipment and structures that are used to produce goods and services