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