Macroeconomics Chapter 7
Technological Knowledge
Technological knowledge refers to society's understanding of the best way to produce goods and services
Real GDP Per Capita
A measure of the total output of a country that takes the gross domestic product (GDP) and divides it by the number of people in the country
Policies to Increase Human Capital Accumulation
Government policymakers can promote human capital accumulation by making education: free, accessible, compulsory, financially beneficial in the present
Diminishing Returns to Capital
Diminishing returns to capital may allow poorer nations to grow faster than more productive nations and "catch-up" over time, nations can increase investment by saving more domestically but the savings-induced productivity growth eventually levels out because of diminishing returns to capital
Policies to Encourage Technological Innovation
Government in developed countries can promote domestic investment in research and development, but the benefits are often global, beneficial government policies include research grands, R&D tax credits, and assigning patents
Corruption and Growth
Government officials are often corrupt and require bribes to do business, corruption strongly discourages entrepreneurial investments
Human Capital Per Worker
Human capital refers to the knowledge and skills that workers acquire through education, training and experience
Foreign Investment
Nations can also increase their capital stock through foreign investments in the country, i.e., investments made in a country financed by foreign firms and residents. This includes foreign direct investment and foreign portfolio investment
Benefits of Free Trade
Nations open to international trade have grown faster than those that try to restrict international trade, international trade exposes countries to new technologies and promotes "reverse engineering"
Natural Resources Per Worker
Natural resources are inputs in production that are provided by nature such as land, minerals, and waterways
Main Sources of Productivity Growth/Differences
Physical capital per worker, human capital per worker, natural resources per worker, technological knowledge
Physical Capital Per Worker
Physical capital refers to the structures and durable equipment that are used to produce goods and services
Political Instability and Growth
Political instability discourages investment because revolutionary governments often confiscate wealth from its owners
Importance of Property Rights
The market system depends on well-defined and consistently enforced property rights
Productivity
The quantity of goods and services produced from each unit of labor unit