Econ Ch. 14

True

Economists study the productivity of all resources including labor, capital, and land.

Up (increases)

Employment goes up or down when new technology is introduced?

United States, United Kingdom, France, Germany, Italy, Japan, Canada

G-7 (group of 7)

Rules of the game (Include laws, customs, and conventions that encourage people to undertake productive activity.)

the formal and informal institutions that provide production incentives and promote economic activity.

Capital

the resource most responsible for increasing labor productivity.

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* Rules of the game are the formal and informal institutions that provide production incentives and promote economic activity. * Include laws, customs, and conventions that encourage people to undertake productive activity.

Literacy

A distinguishing feature between industrial economies and developing economies is the

When labor productivity increases, so does standard of living.

How are labor productivity and standard of living related?

It shows the combination of goods that you must choose between. You can't make everything. There's a trade off.

How does an economy's production possibilities curve illustrate opportunity cost?

Education makes workers more aware of the latest production techniques and more receptive to new ideas and methods. Countries with the most advanced educational systems were the first nations in the world to achieve a high level of economic development.

How does education contribute to the process of economic development?

Increasingly better technology and skilled workforce.

How has the human and physical capital improved over the years in the field of food production?

the accumulated knowledge, skill, and experience of the labor force.

Human capital

The USA produced more output per capita than any other major economy, about 20 percent higher than Canada, which ranked second.

International comparisons

output per unit of labor.

Labor Productivity

large portion of the cost of production

Labor accounts for a

It accounts for a large share of the cost of production and it is easier to measure than other outputs.

Labor is the resource most commonly used to measure productivity because

Real output per work hour (The higher the level of labor productivity, the more output per labor hour, and the higher the standard of living in the economy)

Labor productivity is measured by

Higher literacy = Industrial economy. Lower literacy = Developing economy.

Literacy

improvements in the quality of resources. (changes in quantities of labor and capital amount for less than half of economic growth)

Most growth comes from

Quality

Most growth comes from increases in the ______ of resources.

* There are vast differences in the standards of living among countries. * For example, per capita output in the United States is about 150 times that of the world's poorest countries. * You might say that people in a poor country are poor because the country has low labor productivity.

Standard of Living Info:

Average material well-being of people in the economy

Standard of Living measures

Level of economic prosperity enjoyed by people.

Standard of living

0.167

Suppose it takes a seamstress 12 hours to produce two dresses. What is this worker's labor productivity per hour?

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The United States has produced more output per capita than any other major economy.

Industrial market countries

The advanced market economies of Western Europe, North America, Australia, New Zealand, and Japan; also called developed countries.

True.

The greater the productivity, the more goods and services can be produced from a given amount of resources.

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The more stable a country's political climate is, the more investment there is likely to be.

Basic Research

The search for knowledge without regard to how that knowledge will be used; a first step toward technological advancement.

A new invention allowing paper producers to create more paper using fewer trees.

This stimulates economic growth.

1) An increase in the QUANTITY of capital per worker 2) An improvement in the QUALITY of capital per worker, as reflected by technological change.

Two kinds of changes in capital can improve worker productivity

War-torn Afghanistan and Iraq have little investment. Colombia's drug cartels impede investment in other industries. Authoritarian regimes, such as in Laos and Myanmar, keep these countries from progressing as neighboring countries increase productivity.

What are some examples of existing rules of the game that impede progress in the world?

One Half

About _________ of all workers in the developing countries are in Agriculture.

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Amount of capital produced this year affects the location of the PPF next year.

Standard of living

An economy's level of prosperity; best measured by the value of goods and services produced, on average, per person.

Expands.

An improvement in technology does what to the PPF?

capital deepening.

An increase in the quantity and quality of capital per worker is called

economic growth

An outward shift of the production possibilities frontier reflects

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An outward shift of the production possibilities frontier reflects economic growth.

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As productivity increases, the amount of goods and services produced from a given amount of resources increases

Yes. (Decreased once Soviet Union fell)

At one time, U.S. industrial policy was aimed at creating the world's most advanced military production capacity.

All technology has been enriched (or deepened)

What evidence of capital deepening do you see in the United States?

A newspaper publisher invests in state-of-the-art computers for her staff.

What illustrates capital deepening?

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Capital deepening contributes to labor productivity and to economic growth.

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Capital deepening contributes to labor productivity and leads to economic growth.

The primary engine of economic growth.

Capital serves as

Developing countries

Countries with a lower standard of living because they have relatively little human and physical capital.

Yes.

Do education and capital lead to increased labor productivity?

It does not.

Does GDP measure standard of living? ( Things like Happiness, conditions, etc.)

Yes.

Does a stable political climate promote investment in the economy?

No.

Does land productivity largely determine the standard of living in the United States today?

No

Does most growth come from increases in the quality of resources?

2%.

What percent of the U.S. workforce is in agriculture?

84 percent (Industrial market would be 16 percent)

What percent of the world lives in developing countries?

Resources more available, quality, technological advancements, improvements in rules of game, increase in capital stock.

What shifts the PPF frontier outward.

The Most

When compared to other major economies, the United States produced ___?___ output per capita in 2010.

grows at different rates for different countries

When labor productivity grows, it usually

Civil unrest.

Which doesn't encourage production and exchange, aka economic growth?

Highway

Which is an example of physical capital?

a factory worker who is replaced by a new machine

Which of the following people would be a displaced worker?

They have less human and physical capital.

Why does the 84% of agricultural workers in developing countries produce only 28% of the world's output while the 2% in industrial market economies produces 72%?

Best measure of an economy's standard of living. Output per capita (REAL GDP DIVIDED BY THE POPULATION) indicates how much an economy produces on average per resident.

Output per capita

the machines, building, roads, airports, communications networks and other manufactured creations used to produce goods and services.

Physical capital, AKA capital goods, includes

Inefficient combinations of consumer goods and capital goods.

Points inside the PPF represent.

compares total output to a specific measure of input.

Productivity

how much output is produced from given inputs

Productivity measures

The skill, experience, and education of workers.

Quality of labor

Productivity growth has averaged 2.2 percent per year since 1870. (Small differences in productivity growth can amount to huge differences in the economy's ability to produce and, therefore, in the standard of living)

Record over the Long Run.

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Research and development spending is tracked by examining it in relation to GDP.

Applied research

Research that seeks answers to particular questions or applies scientific discoveries to develop specific products.

Growth declined between 1948 - 1973 to only 1.0 percent between 1974 and 1982. (THIS WAS CAUSED BY:) * Price of oil quadrupled from 1973-4 because of OPEC actions. * Laws passed to protect the environment required more costly production methods. * Inflation introduced business uncertainty.

Slowdown and rebound in productivity growth

An industry cluster is a group of firms in the same business that locate in a region. Examples will vary, but may include Broadway theaters, Wall Street financial institutions, Silicon Valley software companies, and Orlando theme parks.

define an industry cluster, and give three examples.