ECON201 - Chapter 11 Homework

Are the benefits to you of being able to do a Google search included in​ GDP?

​No, because the benefits are diffused throughout the economy.

It has been argued that the slowdown in U.S. productivity growth in recent years is just a measurement problem. Is your answer above consistent with that​ argument?

​Yes, because the benefits are difficult to measure.

Which of the following statements about compounding is​ correct?

Compounding magnifies even small differences in interest rates or growth rates over long periods of time.

The role of the entrepreneur becomes much more important in the new growth theory the endogenous growth model—than in the traditional economic growth model because...

In the new growth​ theory, entrepreneurs play a key role in the development and adoption of new and sometimes untried technologies.

Define​ "creative destruction."

It refers to the process of new technologies advancing living standards while destroying many existing firms.

What does the article mean by a​ "trade dispute"?

It refers to the situation that occurs when two countries impose tariffs and​ non-tariff barriers on each other.

How might Mexico gain from a trade dispute between the United States and​ China? Assuming the United States imposes tariffs on Chinese exports to the United​ States, Mexico benefits from the trade dispute because

Only A and B are correct.

a. What economic variable was the Trump administration hoping would grow at a rate of 3 percent per​ year?

Real GDP

Briefly explain why the Soviet economy failed to overtake the U.S. economy.

The Soviet Union experienced diminishing returns to capital and a slower rate of technological advance.

Based on the data from the figure which one of the following statements is​ false?

The smallest acceleration in growth occurred during the twentieth century as the average annual growth rate increased from 1.3 percent per year to 2.3 percent per year.

Have poor countries been catching up to rich​ countries?

There has been​ catch-up by some poor but industrialized countries.

In​ 1961, why might a leading economist have expected the Soviet economy to eventually have become larger than the U.S.​ economy?

There were rapid increases in capital per hour​ worked, which led to rapid increases in real GDP per hour worked.

Some economies are able to maintain high growth rates despite diminishing returns to capital by using

better or enhanced​ technology, along with accumulating​ capital; these economies are growing because​ technology, unlike​ capital, is subject to increasing returns.

The new growth theory states that

firms will add to an​ economy's stock of knowledge capital by engaging in research and development or by contributing to technological change.

The economic growth model predicts that the

level of per capita GDP in poor countries will increase faster than rich countries and the poor nations will catch up with the rich nations.

When creative destruction​ occurs,

new products and new technologies may be created that improve worker​ productivity, ultimately increasing the growth rate of the economy in the long run.

Economic growth will

slow down or stop if more capital per hour is used because of diminishing returns to capital.

The new growth theory differs from the growth theory developed by Robert​ Solow, since

the Solow growth theory focuses on technological change and the quantity of capital available to workers whereas the new growth theory states that accumulation of knowledge capital is a key determinant of economic growth.

b. What is the connection between productivity growth and growth in the variable you identified in part​ (a)? Productivity refers to​ ____________, and increases in productivity are a key determinant of this​ variable's growth rate.

the quantity of goods and services that can be produced per worker or per hour of work