ECON 202 - Chapter 7
Catch-up effect
countries with smaller starting levels of capital experience larger benefits from increased capital, allowing these countries to grow faster than countries with abundant capital
Diminishing returns to capital
each additional unit of capital provides a smaller increase in output than the previous unit of capital
Productivity
how effectively inputs are converted into outputs; labor productivity is the ratio of the output of goods and services to the labor hours devoted to the production of that output; higher productivity and higher living standards are closely related
Investment in human capital
improvements to the labor force from investments in skills, knowledge, and the overall quality of workers and their productivity
Production function
measures the output that is produced using various combinations of inputs and a fixed level of technology
Rule of 70
provides an estimate of the number of years for a value to double, and is calculated as 70 divided by the annual growth rate
Total factor productivity
the portion of output proceeded that is not explained by the number of inputs used in productions
Infrastructure
the public capital of a nation, including transportation networks, power-generating plants and transmission facilities, public education institution, and other intangible resources such as protection of property rights and a stable monetary environment
Real GDP
the total value of final goods and services produced in a country in a year measured using prices in a base year
Economic growth
usually measured by the annual percentage change in real GDP, reflecting an improvement in the standard of living
Real GDP per capita
real GDP divided by population; provides a rough estimate of a country's standard of living
Compounding
the ability of growth to build on previous growth; it allows a value such as GDP to increase significantly over time as income increases on top of previous increases income
Capital-to-labor ratio
the capital employed per worker; a higher ratio means higher labor productivity and, as a result, higher wages
