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A nation's standard of living is measured by its

real GDP per person

If one wants to know how the material well-being of the average person has changed over time in a
given country, one should look at the

growth rate of real GDP per person

During the past century the average growth rate of U.S. real GDP per person implies that it doubled
about every


Over the last century, US real GDP per person grew at a rate of about

2% per year

Which of the following is correct?

The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of
real GDP per person is a good gauge of economic progress.

The average amount of goods and services produced from each hour of a worker's time is called


Productivity is most closely matched with a country's

level of real GDP divided by hours worked

Productivity explains..

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

Cedar Valley Furniture uses 5 workers working 8 hours to produce 80 rocking chairs. What is the
productivity of these workers?

2 chairs per hour.

Y items per worker
L time

Consider two countries. Country A has a population of 1,000, of whom 800 work 8 hours a day to
make 128,000 final goods. Country B has a population of 2,000 of whom 1,800 work 6 hours a day
to make 270,000 final goods


Which of the following is not correct?

Countries that have had higher output growth per person have typically done so without higher
productivity growth.

Mary looks over reports on four of her workers. Jack made 25 baskets in 5 hours. Walter made 36
baskets in 6 hours. Rudy made 40 baskets in 10 hours. Sam made 22 baskets in four hours. Who has the greatest productivity?

B. Walter

Dilbert's Incorporated produced 5,000,000 units of accounting software in 2009. At the start of 2010
the pointy-haired boss reduced total annual hours of employment from 10,000 to 8,000 and
production was 4,800,000. These numbers indicate that productivity

rose by 20%

The key determinant of a person's standard of living in a country is

the amount of goods and services produced from each hour of a worker's time

The saws, lathes, and drill presses that woodworkers at Cedar Valley Furniture use to produce
furniture are called

physical capital.

Which of the following best illustrates the human capital of a survivor stranded on an island?

a. The fishing poles she has produced.
b. The invention of a better fishing lure.
c. The fresh fruit and fish on and around the island.
d. Her previous training in a survival course.


Which of the following would be human capital and physical capital respectively?

a. for an accounting firm, the accountants knowledge of tax laws and computer software
b. for a grocery store, grocery carts and shelving
c. for a school, chalkboard and desks
d. for a library, the building and the reference librarians' knowledge of the Internet


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

natural resources

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


29. One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The growth that
arises from capital accumulation is not a free lunch. It requires that society

sacrifice consumption goods and services now in order to enjoy more consumption in the future.

30. 30. If there are diminishing returns to capital, then

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

31. 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.

32. If a country's saving rate declined, then other things the same, in the long run it would have

lower productivity and lower real GDP per person.

33. Suppose that a country increased its saving rate. In the long run it would have

higher productivity, but another unit of capital would increase output by less than before.

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