Economic Growth HW
Catch-up growth is the ____________.
process by which relatively poorer nations increase their incomes by taking advantage of the knowledge and technologies already invented in other technologically advanced nations.
Sustained growth is the ____________.
process where GDP per capita grows at a positive and relatively steady rate for long periods of time.
Productivity varies across countries because of differences in ____________. (Check all that apply.)
technology, physical, and human capital vary across countries
An example of sustained growth is ____________.
the United States, which demonstrated sustained growth between 1820 and 2007.
All of the following could explain productivity differences across countries except ____________.
the number of workers.
Productivity is ____________.
the value of output that a worker generates for each hour of work
When technology improves, holding all else constant, an economy can produce ___________.
more output with the same number of inputs, and GDP will increase.
PPP attempts to work out how much currency will be needed to buy _________ quantity of goods and services in different countries.
the same
Assume that the aggregate production function is Y = F(K, H). Let K = 20, H = 20, and the function be Y equals 3 times the product of K and H.
3x(20x20)=1200
What are the consequences of this increase in unemployment for GDP?
Both of these items will decrease.
Which of the following countries will be better off in the long run?
Country A with $1 comma 000 annual GDP per capita and a 6 percent annual growth rate.
A decreased investment in infrastructure.
Decrease in GDP
Which of the following statements regarding the aggregate production function is true?
GDP increases at a decreasing rate for every unit increase in the efficiency units of labor.
In 1968, Paul Ehrlich, a Stanford University professor, claimed that overpopulation would lead to famines and starvation in the 1970s and 1980s. In his book The Population Bomb, he said that unless population growth was curbed, millions around the world would die. However, as we now know, this did not happen. What do you think was the flaw in Ehrlich's argument?
He did not account for the role that technology can play in increasing the food supply
Why is efficiency of production so important to real GDP?
Higher efficiency translates into higher incomes for workers.
An improvement in transportation facilities.
Increase in GDP
Thus, _____ started out with a lower base and had ____growth rate.
Niger, a higher
Holding all else equal, will increasing the efficiency units of labor lead to sustained growth? Why?
Not likely, because each individual has a finite life and there is a limit to the number of years of schooling that an individual can obtain.
Suppose that there is technological advance from period 1 to period 2 but, at the same time, a decrease in the physical capital stock? Can you say whether real GDP will increase or decrease?
Not really, since the two items have offsetting effects.
What does this correlation suggest about real income per capita as a measure of welfare?
Real income per capita is a reliablelong dash—though not perfectlong dash—indicator of human welfare within and across countries.
Galaxy Solutions' competitor, Ruby Ltd. discovers certain practices that enable more efficient use of labor and capital, about which Galaxy Solutions has no idea. In this case, which of the following statements is true?
Ruby Ltd. has higher productivity than Galaxy Solutions.
An example of catch-up growth is ____________.
South Korea, which by 1970 had become poorer relative to the United States, but over the last 40 years grew faster than the United States, closing the gap that had opened up previously.
What is the correlation between income per capita and welfare measures like absolute poverty and life expectancy?
Strong positive correlation.
Suppose you are comparing the income per capita in the United States and Ghana. You try two approaches. In the first approach, you convert the Ghana values into U.S. dollars using the current exchange rate between the U.S. dollar and the Ghanaian cedi. In the second approach, you also convert both values to U.S. dollars using the purchasing power parity-adjusted exchange rate. Which approach is likely to give you a more accurate picture of the living standards in both countries?
The second approach, because it takes into account the relative costs for each country.
What are the consequences of this decrease in real GDP for real GDP per capita and real GDP per worker?
Y1 > Y2.
Is real income per capita more relevant in understanding differences in international living standards than real income per worker?
Yes, as it conveys the conditions of the whole population including children and the elderly.
The aggregate production function describes the relationship between the ____________.
aggregate GDP of a nation and its factors of production.
Suppose there is a job opening at Galaxy Solutions for the position of a financial correspondent. Samantha, a recent post-graduate in physics, and Alice, who has an MBA in finance, apply for it. For this position, Galaxy Solutions is more likely to select _____ because she holds _____
alice, more human capital
Over the past 200 years, the U.S. economy has shown ____________.
an increase in income per capita, albeit an entirely steady one
In this question, we will use what you learned in the second part of the chapter to compare the performance of an economy in two different time periods, as its physical capital stock and efficiency units of labor change. Suppose that from period 1 to period 2, the unemployment rate in the economy increases. Everything else remains unchanged. The total efficiency units of labor will ________ because ___
decrease, less workers are employed
An aggregate production function is used to ____________.
demonstrate how the factors of production are combined to produce GDP.
Currently, some of the fastest-growing countries in the world remain desperately poor. For example, of the top five fastest-growing economies, threelong dashSierra Leone, Mongolia, and Nigerlong dashhave real per capita GDPs that are 203rd, 154th, and 221st in the world, respectively. This seems like something of a contradiction. Using the equation for growth LOADING... given in the chapter, explain why a country that has a very low per capita GDP can also have a very high growth rate. A country with a very low per capita GDP can have a very high growth rate because mathematically, when ___ is ______, even a small difference in the ______ will result in a large growth rate.
denominator, lower, numerator
Human capital is
each person's stock of skills to produce output or economic value
Productivity varies across countries because ___________.
human capital per worker varies substantially from country to country. the quantity of physical capital that workers can access varies greatly across countries. the level of technology differs across countries.
The use of advanced technology.
increase in Gdp
Factors of production are the ____________.
inputs used to produce other goods and services in an economy.
Suppose that a 10 percent increase in the physical capital stock increases GDP by 10 percent. Now consider an additional 10 percent increase in the physical capital stock. This increase in the physical capital stock will increase GDP by
less than 10 percent
GDP at purchasing power parity (PPP) takes into account variations in
living costs
GDP per capita in PPP is the most useful for comparing
living standards
.Consider a $100 increase in GDP per capita. In 2012, Niger had a GDP per capita of approximately $800, and the United States had a GDP per capita of $50, 700. Calculate the corresponding growth rates for these two countries. Niger's growth rate is 12.50 percent, and the U.S. growth rate is 0.2 percent. (Round your responses to two decimal places.)
12.50, 0.20
The old Soviet Union devoted enormous resources exclusively to increasing its physical capital stock, and yet eventually the increase in the country's real GDP came to an end. Based on the discussion in the chapter, explain why this was inevitable.
In the absence of technological innovation, massive capital investments yielded diminishing marginal returns.
Which of the following statements regarding the aggregate production function are not true? (Check all that apply.)
It aggregates the production of a few commodities in an economy. It helps to understand the composition of GDP and various production techniques.
You read a newspaper report that compares wages paid to employees at Starbucks in India and in the United Kingdom. At the time, 1 pound was equal to 87 rupees. The report says that Starbucks baristas in India are paid a mere 56 pence an hour, which is lower than the cheapest coffee that Starbucks sells in the United Kingdom. A friend of yours who read the report is appalled by this information and thinks that Starbucks ought to raise its salaries substantially in India. Is your friend necessarily correct?
No, the flaw in the report is that it converts the wages paid in India to pounds using the current exchange rate, but does not account for the cost of living (or the prices of goods) in India.
Why is total efficiency units of labor used as an indicator of how much the economy can produce?
There exist differences in workers' human capital.
Physical capital is
any good, including machines and buildings, used for production
Use the following diagram to explain the relationship between a country's physical capital stock and GDP. The diagram shows ____________. (Check all that apply.)
both the increasing relationship between capital and output and the law of diminishing marginal product. the aggregate production function, holding total efficiency units of labor constant.
An increase in brain drain in a nation.
decrease in gdp
A decrease in the total efficiency units of labor results from ______ in the average efficiency of workers and/or ______ in the total number of workers in the economy.
decrease, decrease
Galaxy Solutions' ______ includes its office infrastructure.
physical capital
Exponential growth is the ____________.
process by which new growth builds on past growth, leading to a (roughly) constant growth rate.
Technology is
the ability to use labor and capital more efficiently
Economic growth is ____________.
the increase in income (GDP) per capita of an economy.
Give an intuitive explanation of the concept of "efficiency of production." Efficiency of production is the ability of the economy to produce ____________.
the maximal amount of output at a given cost or for given amounts of the factors of production.