Quiz 4

Over two billion of the world's people live on less than _______ per day.

$2.00

Last year the imaginary nation of Freedonia had a population of 2,700 and real GDP of 16,200,000. This year it had a population of 2,500 and real GDP of 14,640,000. What was the growth rate of real GDP per person between last year and this year?

-2.4 percent

In one day Madison Laundry washed 4,000 pounds of laundry with 5 workers who each worked 8 hours. What was its productivity?

100 pounds of laundry per hour

The institutions of economic growth include

Property rights, a dependable legal system, competitive and open markets

Which of the following countries benefited significantly from the catch-up effect in the last half of the twentieth century?

South Korea

Why does South Korea have a higher level of real GDP per capita than North Korea?

South Korea has more human capital than North Korea, South Korea has more physical capital than North Korea, and South Korea has a better system of incentives than North Korea does.

Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain the failure of a poor county to catch up?

The poor country has poorly developed property rights.

When Chile experiences investment from abroad, it experiences, as a result,

an increase in productivity

The level of real GDP person

and the growth rate of real GDP per person vary widely across countries.

In the long run, capital deepening,

raises the levels of both productivity and income.

In the past there have been violent protests against the World Bank and the World Trade Organization. The protesters argued that these institutions promote free trade and also encourage corporations in rich countries to invest in poor countries. The protesters contended that these practices make rich countries richer and poor countries poorer. An economist would

disagree with the protesters because these practices will help make both rich and poor countries richer.

Which of the following is considered human capital? Knowledge acquired from

early childhood education programs, job training and on-the-job experience

Productivity

explains most of the differences in the standard of living across countries.

What is the most direct cause of growth in real GDP per capita?

factors of production

Other things equal, relatively poor countries tend to grow

faster than relatively rich countries; this is called the catch-up effect.

Evidence shows that other things the same, poor countries grow

faster than rich countries. In fact, some countries that were poor in 1870 are now rich.

Productivity is defined as the quantity of

goods and services produced from each unit of labor input

If there are diminishing returns to capital, then

increases in the capital stock increase output by ever smaller amounts.

The catch-up effect refers to the idea that

it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

Economies of scale are the advantage of

large-scale production that reduces average cost as quantity increases.

When considering human history we see that ______ growth in real per capita GDP generally did not occur before the 1870's, ______.

long-run sustained; but now exists in many countries around the world

Which of the following would not be considered physical capital?

on-the-job training

Farmers who use tractors instead of horse-drawn plows have greater yields. Which factor of production explains this result?

physical capital

Countries with high per capita GDP have systems/institutions that make it in people's self-interest to invest in

physical capital, human capital and technology.

In some countries it is time consuming and costly to establish ownership of property. Reforms to reduce these costs would likely

raise real GDP and productivity