econ chapter 25

Nonrenewable resource

a resource that cannot be replaced (oil)

Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity

more in the short run than in the long run

brain drain

the loss of highly educated and skilled workers to other countries

Growth rate percent per year ___

ignores short-run fluctuations and represents an average rate of growth for real income per person over many years

Technological knowledge refers to

society's understanding about how the world works -quality of society's textbooks

the catch-up effect

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

productivity

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

Each year of school has historically raised a person's wage by

10 percent

Renewable resource

A natural resource that can be replaced at the same rate at which the resource is consumed (trees)

World Bank

International organization which obtains funds from world's advance countries and uses these resources to make loans to less developed countries.

foreign direct investment

Investment made by a foreign company in the economy of another country.

factors of production

The inputs used to produce goods and services - labor, land, and capital

the following can be measured by the level of real GDP per person

The standard of living but not productivity

Natural resources are not necessary for __

an economy to be highly productive in producing goods and services ex: Japan - imports many natural resources and exports manufactured goods

When the economy has a high level of capital

an extra unit of capital leads to a small increase in output

Foreign invest raises the GNP __

by less than it raises the production of GDP - if ford opens a factory in Mexico, some of the income accrues to people who don't live in Mexico

Accurately describe the catch up effect

in one generation, china will be one of the rich countries in the world, if Chinas GDP per person continues to grow 9% per year

GDP measures

income and expenditures

Suppose Japanese-based Toshiba Corporation builds and operates a new computer factory in the United States. Future production from such an investment will

increase U.S. GDP more than it increases U.S. GNP.

In the long run, the higher saving rate

increases the level of productivity but not to higher growth in these variables

outward-oriented policies

international trade in goods and services can improve the economic well-being of a country's citizens - best for poor countries to pursue

For society to invest more in capital...

it must consume less and save more of its current income

Even though Japan had a higher growth rate of real GDP per person than the United States over the last 120 years

japan real level of gdp < real level gdp us

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should

lend support to the invisible hand by maintaining property rights and political stability

Educational attainment tends to be

low in countries with high population growth

Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic growth?

nutrition

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

productivity

If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity

rises but real per person GDP falls

technological knowledge

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

An understanding of the best ways to produce goods and services is called

technology

Growth in productivity is ___

the key determinant of growth in living standards

diminishing returns / diminishing marginal product of capital

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

Human capital refers to

the resources expended transmitting this understanding to the labor force -amount of time the population reads textbooks

Human capital

the skills and knowledge gained by a worker through education, training, and experience

Physical capital (captial)

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

From 1960 to 1990, in which of the following countries has investment resulted in economic growth sufficiently higher than that in the United States?

South Korea

when the economy has a low level of capital

an extra unit of capital leads to a large increase in output

foreign portfolio investment

an investment that is financed with foreign money but operated by domestic residents (Mexico building a new factory with profits from shares)

inward-oriented policies

attempt to increase productivity and living standards within the country by avoiding interaction with the rest of the world

patent

gives company temporary right to be exclusive manufacturer of certain product

capital and human capital are

produced factors of production

Natural resources

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