Chapter 12

the catch-up effect refers to the idea that

it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

human capital is the

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

proprietary technology is knowledge that is

known only by the company who discovered it

in a market economy, scarcity is most clearly reflected in

market prices

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

natural resources

which of the following is an example of a nonrenewable resource

oil

technology progress has made

once-crucial natural resources less necessary

if a country's saving rate increases, then in the long run

productivity and real GDP per person are both higher

once adjustment is made for inflation

the prices of most natural resources have been about steady or falling

A nation's standard of living is determined by

the productivity of its workers

physical capital

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

Why is productivity important?

-Key determinant of living standards -Growth in productivity is the key determinant of growth in living standards -An economy's income is the economy's output

which of the following would increase productivity

-an increase in the physical capital stock per worker -an increase in human capital per worker -an increase in natural resources per worker

education Pros

-investment in human capital -gap between wages of educated and uneducated workers -conveys positive externalities

investment from abroad

-is a way for poor countries to learn the state-of-the-art technologies developed and used in richer countries -is viewed by economists as a way to increase growth -often requires removing restrictions that government have imposed on foreign of domestic capital

education cons

-opportunity cost -brain drain

Educated people may generate ideas that increase production. These ideas

-produce a return to society from education that is greater than the return to the individual -could justify government subsides for education -are external benefits of education

in order to promote growth in living standards, policymakers must

-protect property rights -encourage the accumulation of factors of production -maintain political stability

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 county to catch up?

-the poor country has many corrupt officials -the poor country has a health epidemic such as the Zika virus -the poor country imposes heavy tariffs to protect infant industries

in the U.S. each additional year of schooling has historically raised a person's wage on average by about

10 percent

Over the past century in the United States, real GDP per person has grown, on average, by about

2 percent per year

which of the following is an example of the "brain drain?"

a country's most highly educated workers emigrate to rich countries

If companies from foreign countries build and operate factories in China, then China's productivity

and the wages of Chinese workers increase

technology knowledge refers to

available information on how to produce things

suppose that in some country the price of silver increased from $30 per ounce to $31 per ounce during a time when the overall price level increased by 5 percent. During the period, the real price of silver

decreased

productivity

explains most of the differences in the standard of living across countries

which of the following is an example of physical capital

the equipment in a factory

which of the following is correct

The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress.

in recent decades Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in

foreign portfolio investment

which of the following are residents of rich countries likely have in greater quantities, or better quality, than residents of poor countries?

housing, healthcare, life expectancy

A country's human capital increases

if its workers become better educated or healthier.

government corruption

impedes the coordinating power of markets and discourages investment

in the fourteenth century it is estimated that deaths resulting from the bubonic plague reduced the population by about a third. Assuming diminishing returns, the decrease in population should have

increased productivity and real GDP per person

over the last ten years productivity grew faster in Mapoli than in Romeria while the population and total hours worked remained the same in both countries. It follows that

real GDP per person grew faster in Mapoli than in Romeria

which of the following will increase a country's real GDP per person?

reducing restrictions on foreign trade and foreign investment

technological knowledge

society's understanding of the best ways to produce goods and services public information and property knowledge

technology has allowed us to

substitute renewable resources for some nonrenewable resources

natural resources

the inputs into the production of goods and services that are provided by nature, renewable, nonrenewable

human capital

the knowledge and skills a worker gains through education and experience

which of the following is a part of your economics professor's human capital

the things she learned at some prestigious university

If an inexpensive alternative to oil were found, the price of oil adjusted for inflation

would decline as the alternative would reduce the demand for oil