Chapter 7 - PRODUCTION AND GROWTH Flashcards
How is productivity defined?
The quantity of goods and services produced from each hour of a worker’s time.
What does “Level of real GDP” gauge?
Economic prosperity (välstånd).
What does the “Growth of real GDP” gauge?
The economic progress.
What are the determinants of productivity?
-Physical capital per worker
-Human capital (education) per worker
-Natural resources per worker
-Technological knowledge
How is the production function defined?
Y = A f (K, H, N, L)
where Y = quantity of output
K = quantity of physical capital
H = quantity of human capital
N = quantity of natural resources
L = quantity of labor
A is the variable that reflects the available production technology, as technology improves, A rises
How is output per worker defined?
Output per worker = productivity = Y/L = Af (K/L, H/L, N/L, 1)
What can government policy do to raise productivity and living standards?
- The importance of saving and investment
- Diminishing returns (avtagande avkastning) and the catch-up
- Investment from Abroad
- Education
- Health and Nutrition
- Property rights and political stability
- Free trade
- R&D
- Population growth
What is foreign portfolio investment?
an investment that is financed with foreign money but operated by domestic residents.
What is Brain drain?
Emigration of many of the most highly educated workers to rich countries, where they can enjoy a higher standard of living.
What does Property rights means?
The ability of people to exercise authority over the resources they own (this includes all). Courts serve an important role in the market economy. They enforce property rights. Countries with an efficient court system will typically enjoy a higher standard of living.
How can population growth has a variety of effects on economic growth?
More rapid population growth may lower productivity by stretching the supply of natural resources and by reducing the amount of capital available for each worker.
A large population may improve the rate of technological progress because there are more scientists and engineers.
Which one of the following is an example of foreign portfolio investment?
a) Honda builds a new plant in Ontario.
b) Royal Bank builds a new corporate office building.
c) A U.S. pension fund buys stock in Air Canada, and Air Canada uses the proceeds to buy new airplanes.
d) A Canadian citizen buys stock in Air Canada, and Air Canada uses the proceeds to buy a new airplane.
C
When Carly was born, her parents deposited $6000 in a bank account for her. Using the rule of 70, which one of the following is the amount that will be in the bank account when Carly is 56 years old, if the deposit earns 5 percent per year?
$96 000
Because capital is subject to diminishing returns, higher saving and investment does not lead to which of the following conditions?
a) higher income in the long run
b) higher income in the short run
c) higher growth in the long run
d) higher growth in the short run
C
