Chapter 16: Long-Run Growth

sources of economic growth

-increase in labor supply -increase in physical capital- plant and equipment -increase in the quality of capital (embodied technical change) -disembodied technical change- an increase in managerial skills

Gene Grossman and Alan Krueger found that as growth progresses and countries become​ richer, pollution tends to increase. A. False B. True

A. False

In​ 1972, the Club of Rome contracted with a group at MIT to do a study entitled The Limits to Growth. The​ report, which assumed present growth rates of​ population, food, industrial​ output, and resource exhaustion indicated that the limits would be reached and the entire world economy would come crashing down sometime after the year 2000. A. True B. False

A. True

Foreign direct investment is any investment in enterprises made in a country by residents outside that country. A. True B. False

A. True

correct, Concept Check 2.7 Question Help Of the following​ decades, which had the highest productivity growth in the United​ States? A. 1970s B. 1960s C. 1990s D. 1980s

B. 1960s

In the absence of increases in the supply of​ labor, as the capital stock​ increases, diminishing returns will set in. A. False B. True

B. True

The expanding stock of physical capital contributes directly to

The expanding stock of physical capital contributes directly to output as well as indirectly by enhancing​ labor's productivity. This enhanced productivity of labor signifies an improved standard of living.

When the labor supply​ increases, this is referred to as an increase in human capital. A. False B. True An increase in the quality of labor as well as an increase in the quantity of labor will each lead to​ long-run growth. A. True B. False

When the labor supply​ increases, this is referred to as an increase in human capital. A. False An increase in the quality of labor as well as an increase in the quantity of labor will each lead to​ long-run growth. A. True

aggrgeate production function

a mathematical relationship stating that total GDP (output) depends on the total amount of labor used and the total amount of capital used between inputs-the labor force and the stock of capital- and total national output

In the absence of increases in the capital​ stock, as labor​ increases, diminishing returns will set in a. true b. false

a. true

invention

an advance in knowledge

Economic growth generally refers to the increase in productivity attributable to

capital accumulation, technological change, and innovation explanation: Technological​ change, innovation, and capital accumulation​ (production) are the primary forces behind the productivity advances that propel economic growth.

diminishing returns

in the absence of increases in the capital stock, as labor increases, less and less output will be added by each worker if L increases, Capital(K) decreases, total output Y will increase but Labor Productivity(Y/L) and Marginal Return to Labor(change in Y/Change in L) decreases

foreign direct investment (FD)

investment in enterprises made in a country by residents outside that country -influential in providing needed capital for growth in much of Southeast Asia

disembodied technical change

technical change that results in a change int he production process -ex: better incentives produced better use of labor and capital

embodied technical change

technical change that results in an improvement in the quality of capital

per-capita output growth

the growth rate of output per person in the economy -measure of the standard of living in a country ; not the same as output per worker because not everyone in the economy works -output per capita can fall even when output per worker is increasing if the fraction of the population that is working is falling(as it might be in a country with an increasing number of children per working-age adult) -tells how much output each person would receive if total output were evenly divided across the entire population

labor productivity growth

the growth rate of output per worker -tells how much output each worker on average is producing and how that is changing over time

output growth

the growth rate of the output of the entire economy

catch-up

the theory stating that the growth rates of less developed countries will exceed the growth rates of developed countries, allowing the less developed countries to catch up

innovation

the use of new knowledge to produce a new product or to produce an existing product more efficiently

Convergence theory suggests that when​ poorer, less developed countries begin to​ develop, they typically have higher growth rates as they ​catch-up with the more developed countries. a. true b. false

true

Economic growth shifts the production possibility frontier A. down and to the right. B. down and to the left. C. up and to the right. D. up and to the left.

up and to the right.