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.