ECON CONNECT chap 27

Assume that per capita income is growing at different rates in the following countries: Nepal, 1.1 percent; Kenya, 1.7 percent; Singapore, 7.2 percent; Egypt, 3.9 percent. How long will it take for each country to double its income per person? Instructions: Enter your responses rounded to one decimal place. Nepal: years Kenya: years Singapore: years Egypt: years

65.5 42.4 10.0 18.5

How does growth through technology differ from growth through the accumulation of physical capital? Growth through the accumulation of physical capital leads to increasing marginal returns, while growth through technology leads to diminishing marginal returns.Growth through technology and growth through physical capital have the same results. It doesn't matter how growth happens; they have the same effects.Technology can change the types of goods people buy in an economy by introducing new types of products and technology makes the existing capital more efficient; accumulation of physical capital does not make such changes.Growth through technology leads to increases in per capita income, while growth through the accumulation of physical capital does not.

A

What roles do specialization and division of labor play in economists' support of free trade? Through free trade, countries specialize in the goods for which they have a comparative advantage and trade for those in which they do not. Specialization allows a country to divide labor among the various production segments, which results in higher productivity and greater economic growth for the involved countries.Economists generally do not recommend that a country specialize because when foreign demand for that product declines, the economy will experience a recession and a period of adjustment until the country can produce other goods.Economists support free trade so that labor can be divided between domestic and foreign production. Such specialization leads to learning by doing, greater productivity, and growth.Economies that choose to specialize in particular production processes divide their labor between production for domestic and foreign consumption. Economies that do this are better poised to export and improve their balance of payments.

A

Name three types of capital.Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. A. Physical capital B. Scientific capital C. Human capital D. Productive capital E. Social capital

A C E

Refer to the figure below. How does the loanable funds market translate savings into investment? (A.Saving B.Investment) is shown by the supply curve, while (C.investment D.saving) is shown by the demand curve.What equilibrates the two? E. The interest rate F. The minimum wage rate G. The inflation rate H. Financial markets

A C E

How can an increase in the U.S. saving rate lead to higher living standards? Increasing the saving rate decreases domestic reliance on foreign direct investment, which lowers the domestic interest rate.An increase in the saving rate now means that there will be more funds available for consumption later. With compounding, the increase will be even greater.Increasing the saving rate increases investment, which increases technological growth and total output, both of which raise people's income, leading to a higher standard of living.Increasing the saving rate lowers consumption, reducing demand for produced goods, which lowers GDP and the standard of living.

B

On what law of production did Thomas Malthus base his prediction that population growth would exceed growth in goods and services? A. Say's law B. The law of diminishing marginal productivity C. The rule of 72 D. The law of one price

B

Outline some of the benefits and costs to society when it experiences growth. A. Benefits: Pollution, resource exhaustion, and destruction of natural habitat. Costs: Higher income, higher employment, and a higher standard of living. B. Benefits: Higher income, higher employment, and a higher standard of living. Costs: Pollution, resource exhaustion, and destruction of natural habitat. C. Benefits: Higher income, higher employment, pollution, and resource exhaustion. Costs: Destruction of natural habitat and a higher standard of living. D. Benefits: Lower income, lower employment, and a higher standard of living. Costs: Pollution, resource renewal, and restoration of natural habitat.

B

Classical growth theory and new growth theory both contribute to economists' understanding of how the sources of growth lead to economic growth.a. They are similar in that they both promote government intervention.focus on saving.require investment for growth.focus on technology. b. They are different because classical growth theory focuses on wages and prices while new growth theory focus consumption and aggregate demand.consumption and personal income while new growth theory focus on capital investment.technological change while new growth theory focus on saving.saving and investment while new growth theory focus on technological change.

B D

Using the demand and supply of loanable funds, demonstrate the effect of the following on the interest rate. As a result, what would you expect to be the impact of the change on growth? a. Government increases spending without increasing taxes. Instructions: Demonstrate the effects on demand or supply of loanable funds by clicking and dragging the appropriate curve(s) to a new position. As a result, what would you expect to be the impact of the change on growth? Growth will (A.increase B.decrease C.not change D.increase or decrease). b. Businesses become more productive. Instructions: Demonstrate the effects on demand or supply of loanable funds by clicking and dragging the appropriate curve(s) to a new position. As a result, what would you expect to be the impact of the change on growth? Growth will (E.increase or decrease F.not change G.increase H.decrease). c. People as a whole save more. Instructions: Demonstrate the effects on demand or supply of loanable funds by clicking and dragging the appropriate curve(s) to a new position. As a result, what would you expect to be the impact of the change on growth? Growth will (I.not change J.decrease K.increase L.increase or decrease.)

B H K

What are network externalities and how do they lead to growth? A. Network externalities are another name for positive technology spillovers. Use of a technology by one individual "spills over" the technology to everyone. Thus, switching to any other technology can be extremely easy. B. Network externalities are negative externalities in which the use of a good by one individual makes that technology less valuable to other people. C. Network externalities can make switching to a superior technology more desirable.Network externalities are externalities in which the use of a good by one individual makes that technology more valuable to other people. D.Network externalities can make switching to a superior technology expensive or nearly impossible.Network externalities are not actually externalities, but have been erroneously named as such. In this case, when one individual uses a good, then that technology is not available to other people, so network externalities can make switching to another technology expensive or nearly impossible.

C

Why hasn't Thomas Malthus's prediction come true? Because labor has become more efficient as a result of education and technological progress, output per worker has increased.Because the rate of saving has increased, it has contributed to an increased productive capacity, increasing output per worker.Because land is no longer considered a constant, output per worker has increased.Because capital is considered a constant, output per worker has increased.

C

Spillover effects occur when A. changes in taxes result in changes in consumption. B. trade in one country creates trade in another country. C. technological gain in one sector of production gives those in other sectors of production new ideas. D. consumption in one sector leads to consumption in another sector. Spillovers can affect economic growth because A. these effects influence personal income and consumption. B. they are similar to the accelerator model which impacts sector after sector. C. they are similar to positive externalities which impacts sector after sector. D. these result in changes in fiscal and monetary policy which foster growth.

C C

Who most likely worked longer to buy a dozen eggs: a person living in 2017 or a person living in 1910? Why? A. A person living in 2017 because the average work week has fallen. B. A person living in 1910 because the average work week has increased. C. A person living in 2017 because real per capita income has declined since 1910. D. A person living in 1910 because real per capita income has increased since 1910.

D

Explain how each of the following is expected to affect growth: a. Increase in technology: (Click to select) Growth increases Growth decreases The effect is uncertain b. Positive externalities: (Click to select) Growth increases Growth decreases The effect is uncertain c. Patents: (Click to select) The effect is uncertain Growth decreases Growth increases d. Learning by doing: (Click to select) The effect is uncertain Growth increases Growth decreases e. Technological lock-in: (Click to select) Growth decreases. Growth increases The effect is uncertain

a. Growth increases b. Growth increases c. The effect is uncertain d. Growth increases e. Growth decreases