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macro econ long run economic growth homework and practice test q/a's

significant economic growth did not begin until what

industrial revolution

A model that explains growth rates in real GDP per capita over the long run

Economic growth model

The quantity of goods and services that can be produced by one worker or by one hour of work.

Labor productivity

The three main sources of technological change:

-better machinery and equipment
-increases in human capital
-Better means of organizing and managing production.

A change in the quantity of output a firm can produce using a given quantity of inputs

Technological change

The accumulated knowledge and skills that workers acquire from education and training or from their life experiences

Human Capital

The relationship between real GDP per hour worked and capital per hour worked, holding the level of technology constant.

Per-worker production function

note-they both increase, however the real gdp per hour worked is increasing dimishingly. thus the only way to increase this is to have a technological change.

real gdp increases diminishingly in the per worker production function because of what? this is caused by no technological advancement

the law of diminishing returns

A model of long-run economic growth that emphasizes that technological change is influenced by economic incentives and so is determined by the working of the market system.

New growth theory

what is non excludable and nonrival

knowledge capital

firms do THIS on knowledge capital

'free ride'

the government can increase knowledge capital in 3 ways:

1. protecting intellectual property with patents and copyrights
2.Subsidizing research and development
3. Subsidizing education.

a 'convergence' where the economic growth model predicts that poor countries will grow faster than rich countries

Catch-up(aka convergence)

The purchase or building by a corporation of a facility in a foreign country.

Foreign direct investment (FDI)

The purchase by an invidividual or a firm of stock or bonds issued in another country

Foreign portfolio investment

the more globalized your country is, the more/less the rate of real GDP per capita is.

more globalized=more real GDP per capita
less globalized= less real GDP per capita

this occurs when a successful person leaves their low-income country to go to a foreign high-income country because they beleive that economic activities are very limited in their domestic country


this is where the government gives a partial or fractional tax refund when they invest in physical capital

investment tax credits

Why has productivity growth in the US been faster than in most other industrial countries?

Increased government regulation

Flexible labor markets

Longer periods of unemployment benefits

Efficient financial markets

Flexible labor markets


Efficient financial markets

the US productivity growth has exceeded average productivity growth where

than the REST OF THE WORLD!!!!!

The easiest way for firms to gain access to new technology is through which of the following?

wars and civil strife

foreign direct investment

savings and investment

health and education

Foreign direct investment

What factor will most likely improve economic growth in weak rule-of-law countries?

Political reform, duh, lol!

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