econ test 2 chapter 12 extra questions

if real income per person in 2015 is 18073 and real income per person in 2016 is 18635 what is the growth rate of real income over this time period

3.1 percent

explain the opportunity cost of investing in capital. is there any difference in the opportunity cost of investing in human capital versus physical capital

someone must forgo current consumption. No, someone must save instead of consume regardless of whether education or machines are purchased with the saving

most likely to emit a positive externality

susan pays her college tuition

brazil, japan, and china are growing very quickly because

they save and invest an unusually high percentage of their real income

an example of foreign portfolio investment

toyota buys stock in ford, and ford uses the proceeds to build a new plant in michigan

if foreigners buy newly issued stock in ford, and ford uses the proceeds to expand capacity by building new plants and equipment, which will rise more in the future: GDP or GNP? why? what do we call this type of investment?

GDP. GNP measures only the income of Americans while GDP measure income generated inside the US. Therefore, GDP will rise more than GNP because some of the profits from the capital investment will accrue to foreigners in the form of dividends. Foreign portfolio investment

an increase in technological knowledge

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

copper is an example of

a nonrenewable natural resources

Thomas Malthus argued tjat

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

why does an increase in the rate of saving and investment only increase the rate of growth temporarily?

because there are diminishing returns to physical capital

the opportunity cost of growth is a reduction in

current consumption

if a production function exhibits constant returns to scale, doubling all of the inputs

doubles output

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

human capital

how does human capital differ from physical capital?

human capital is the knowledge and skills of the worker. physical capital is the stock of equipment and structures

for a given level of technology we should expect an increase in labor productivity within a nation when there is an increase in

human capital per worker physical capital per worker natural resources per worker

if mazda builds a new plant in ohio

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

least likely to increase growth in africa

increase restrictions on the importing of japanese automobiles and electronics

when a nation has very little income 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

economists measure both the level of real income per person and the growth rate of real income per person. what different concept does each statistic capture?

level of real income per person measures standard of living. growth rate measures rate of advance of the standard of living

must poor countries stay relatively poor forever and must rich countries stay relatively rich forever? why?

no. since growth rates vary widely across countries, rich countries can become relatively poorer and poor countries can become relatively richer

our standard of living is most closely related to

our productivity because our income is equal to what we produce

some economists argue for lengthening patent protection while some economists argue for shortening it. why might patents increase productivity? why might they decrease productivity?

patents provide a property right to an idea; therefore, people are willing to invest in research and development because it is more profitable. research and development is a public good once the information is disseminated, and a patent restricts this public use

what factors determine productivity? which ones are human produced?

physical capital per worker, human capital per worker, natural resources per worker, and technological knowledge. all except natural resources

to increase growth, governments should

promote free trade, encourage saving and investment, encourage foreigners to invest in your country, and encourage research and development

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

real income per person