Week 3

diminishing returns

the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases

productivity

the quantity of goods and services produced from each unit of labor input

What can be measured by the level of real GDP per person?

the standard of living but not productivity

physical capital

the stock of equipment and structures that are used to produce goods and services

The level of real GDP per person and the growth of real GDP per person

vary widely across countries

Last year the imaginary nation of Freedonia had a population of 2,800 and real GDP of 16,800,000. This year it had a population of 2,700 and real GDP of 15,390,000. About what was the growth rate of real GDP per person between last year and this year?

-5 percent

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year?

2 percent

In 2010, the imaginary nation of Bovina had a population of 5,000 and real GDP of 600,000. In 2011 it had a population of 5,200 and real GDP of 636,480. During 2011 real GDP per person in Bovina grew by

2 percent, which is about the same as the average U.S. growth over the last one-hundred years

In 2012, the imaginary nation of Dorados had a population of 8,000 and real GDP of 3,000,000. During the year its real GDP grew by about 2.9%. What set of growth rates is consistent with this growth in real GDP?

4% population growth and 7% real GDP growth

Americans have a higher standard of living than Indonesians because

American workers are more productive than Indonesian workers

What is a correct way to measure productivity?

Divide the quantity of output by the number of hours worked

In determining living standards, productivity plays a key role for

both nations and individuals

Productivity is defined as the quantity of

goods and services produced from each unit of labor input

Countries that have had higher output growth per person

have typically done so without higher productivity growth

Productivity is the amount of goods and services

produced for each hour of a worker's time. It is linked to a nation's economic policies

The one variable that stands out as the most significant explanation of large variations in living standards around the world is

productivity

catch-up effect

the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich

A nation's standard of living is best measured by its

real GDP per person

technological knowledge

society's understanding of the best ways to produce goods and services

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

What is a good gauge of economic progress?

the growth rate of real GDP per person, but not the level of real GDP per person

natural resources

the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits

human capital

the knowledge and skills that workers acquire through education, training, and experience

The key determinant of the standard of living in a country is

the number of goods and services produced from each hour of a worker's time

A nation's standard of living is determined by

the productivity of its workers