Chapter 12

Renewable resources

Natural resource that can be reproduced

Nonrenewable resource

Natural resource that is limited in supply

Outward-oriented policies

Policies that decrease international trade restrictions

Inward-oriented policies

Policies that increase international trade restrictions

A reasonable measure of the standard of living in a country is

Real GDP per person

Infant-Industry argument

Restricting international trade to project fledging domestic industry from foreign competition

Which of the following expenditures to enhance productivity is most likely to emit a positive externality?

Susan pays her college tuition

Property rights

The ability of people to exercise control over their resources

Growth rate

The annual percentage change in output

Human Capital

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

Catch-up effect

The property that poorer countries tend to grow more rapidly than richer countries

Real GDP per person

The quantity of goods and services available for the average individual in the economy

Productivity

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

Production function

The relationship between inputs and outputs from production

Physical capital

The stock of equipment and structures used to produce output

An increase in the rate of saving and investment permanently increases a country's rate of growth

False

If Mazda builds a new plant in Illinois

in the future, US GDP will rise more than US GNP

If real GDP per person in 2009 is $18,073 and real GDP per person in 2010 is $18,635, what is the growth rate of real output over this period?

3.1 percent

Which of the following describes an increase in technological knowledge?

A farmer discovers that it is better to plant in the spring rather than in the fall

Public good

A good that we may all use at the same time without diminishing another's benefits

Constant returns to scale

A production process where doubling all of the inputs doubles the output

Technological knowledge

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

Foreign portfolio investment

Capital investment financed with foreign money but operated by domestic residents

Foreign direct investment

Capital investment owned and operated by foreigners

A country can only increase its level of investment by increasing its saving

False

Economic evidence supports that predictions of Thomas Malthus regarding the effects of population growth and the food supply on the standard of living

False

Evidence of rising prices for natural resources demonstrates that nonrenewable resources will become so scarce that economic growth will be limited

False

Human capital refers to human-made capital such as tools and machinery, as opposed to natural capital such as rivers and timber

False

Most economists believe that inward-oriented policies that protect infant industries improve growth rates of developing nations

False

The United States should grow faster than Japan because the United States has a larger economy

False

Madelyn goes to college and reads many books while at school. Her education increases which of the following factors of production?

Human capital

Which of the following government policies is least likely to increase growth in Africa?

Increase restrictions on the importing of Japanese automobiles and electronics

Natural Resources

Inputs into production provided by nature

Factors of production

Inputs used in production, such as labor, capital, and natural resources

Many East Asian countries are growing very quickly because

They save and invest an unusually high percentage of their GDP

Which of the following is an example of foreign portfolio investment?

Toyota buys stock in ford, and ford uses the proceeds to build a new plant in Michigan

An increase in capital should cause the growth rate of a relatively poor country to increase more than that of a rich country

True

Countries have great variance in both the level and growth rate of GDP per person, thus poor countries can become relatively rich over time

True

If Germans invest in the US economy by building a new mercedes factory, in the future US GDP will rise by more than US GNP

True

If a production function exhibits constant returns to scale, then doubling all of the inputs double output

True

In very poor countries, paying parents to send their children to school may increase the education of poor children and decrease the use of child labor

True

Investment in human capital and technology may be particularly productive because of positive spillover effects

True

The only factor of production that is not "produced" is natural resources

True

The opportunity cost of additional growth is that someone must forgo current consumption

True

The rate of economic growth is probably underestimated

True

Externality

When the actions of one person affect the well-being of a bystander

Diminishing returns

When the incremental increase in output declines as equal increments of an input are added to production

Copper is an example of

a nonrenewable natural resource

Thomas Malthus argued that

an ever-increasing population in constrained only by the food supply, resulting in chronic famines

The opportunity cost of growth is a reduction in

current consumption

When a nation has very little GDP per person..

it has the potential to grow relatively quickly due to the "catch-up-effect"

Once a country is wealthy

it may be harder for it to grow quickly because of the diminishing returns to capital

For a given level of technology, we should expect an increase in labor productivity within a nation when there is an increase in each of the following except

labor

To increase growth, governments should do all of the following except

nationalize major industries

Our standard of living is most closely related to

our productivity because our income is equal to what we produce