The key statistic used to measure economic growth is:
real GDP/population size.
In the U.S., GDP per capita is ________ five times what it was in 1900 causing a ______ in the standard of living.
over; large increase
According to the rule of 70, if real GDP per capita grows at 5% per year, then GDP will double in:
Why is the average worker today produces far more than his or her counterpart a century ago?
The modern worker has access to the century's accumulation of technical progress, and more physical capital and human capital as compared to his or her 19th century counterpart.
Which of the following is the most important cause of productivity growth in the U.S.?
progress in technology
When the amount of human capital and technology stays fixed and workers are given more and more physical capital, then output:
rises at a decreasing rate, since adding more capital results in diminishing returns when labor and technology are fixed.
Diminishing returns to physical capital may disappear if:
Real GDP per worker in the country of Esperano has grown at 4% per year for the last 30 years. The labor force has grown at 1% per year and the quantity of physical capital has grown at 5% per year A 1% increase in average physical capital per worker (all other things being equal) raises productivity by 0.5%. Average education has not changed. How much has productivity grown?
Output per worker has grown by 4%, because output has grown by 4% and labor has grown by 1%.
Real GDP per worker in the country of Esperano has grown at 4% per year for the last 30 years. The labor force has grown at 1% per year and the quantity of physical capital has grown at 5% per year A 1% increase in average physical capital per worker (all other things being equal) raises productivity by 0.5%. Average education has not changed. How much has growing physical capital per worker contributed to productivity growth?
2.5%: Physical capital has grown by 5%. This increase in capital raises output per worker, or productivity, by 5% x 0.5 = 2.5%.
Real GDP per worker in the country of Esperano has grown at 4% per year for the last 30 years. The labor force has grown at 1% per year and the quantity of physical capital has grown at 5% per year A 1% increase in average physical capital per worker (all other things being equal) raises productivity by 0.5%. Average education has not changed. How much has technological progress contributed to productivity growth?
1.5%: The growth in physical capital per worker has contributed 2.5% to the 4% total productivity growth. 4% - 2.5% = 1.5%. So 1.5% of the growth is due to technology. Human capital did not contribute to growth because it did not change.
Increasing a country's natural resources should ____________ output, and the impact of this factor should be considered a ______ important source of productivity growth as compared to human capital.
increase; less (Increasing natural resources increase output and natural resources are less important source of productivity growth.)
The U.S. became the world's leading economy in part because:
American firms were among the first to make research and development a part of their operations.
The prime reason most countries grow is that they have ________ by drawing upon ________.
high rates of investment; high rates of domestic savings
The convergence hypothesis states that relatively poor countries:
should have higher rates of per capita GDP growth than rich countries do.
The empirical evidence for the convergence hypothesis:
holds true for wealthy nations.
Economists believe that likely limits to economic growth will arise mainly because of:
Long-run economic growth depends primarily on:
productivity. Per capita output rises when each worker can produce more goods and services.
A sustained increase in per capita GDP arises from:
higher productivity. Additions to the stock of physical and human capital will expand the productive capacity of the economy.
To the extent that the U.S. workforce is becoming more educated,
there is an increase in the amount of human capital. Increases in human capital enhance productivity.
Which of the following is NOT a determinant of productivity?
the level of wages, NOT the level of technology, or the amount of physical/human capital per worker.
As more physical capital is added to the production process while the number of workers remains constant,
the amount of output per worker increases, but at a decreasing rate.
Total factor productivity is a measure of:
technological progress. Total factor productivity cannot be observed directly, but it is calculated as the residual component of growth not explained by observable factors.
The inputs of the aggregate production function are:
physical capital per worker, human capital per worker, and technology.
The evidence seems to suggest that innovations in information technology made the most significant contributions to productivity:
when they changed the way office work is done.
In order to increase its stock of physical capital, an economy must:
engage in investment spending. Investment spending provides a way for goods that are produced today to be devoted to creating higher output in the future.
A healthy banking system can contribute to the growth of an economy by:
providing a way for savings to be channeled into business investment.
Education provided for the citizens of an economy will enhance economic growth by:
adding to the stock of human capital.
Governments that provide and maintain a good infrastructure for economic activity can enhance productivity and growth.
One of the key elements of good infrastructure is public health.
The economic success observed over the past twenty-five years on Brazil's cerrado is due to:
government-sponsored research and development.
East Asia's "economic miracle" has been attributed to all of the following:
its very good basic education, its very high savings rates, and its substantial technological progress, EXCEPT important discoveries of new sources of natural resources.
Those who question whether long-run economic growth is sustainable emphasize that:
whether it can continue in the face of the limited supply of natural resources and the impact of economic growth on the environment.