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Flashcards in Chapter 25 Deck (17)
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1
Q

Standard of living depends on

A

ability to produce goods and services (productivity)

2
Q

Productivity

A

the amount of goods and services produced for each hour of a workers time

3
Q

factors of production (definition)

A

inputs used to produce goods and services

4
Q

factors of production

A
  • physical capital
  • human capital
  • natural resources
  • technological knowledge
5
Q

Physical Capital

A

stock of equipment and structures (tools, office buildings)

6
Q

Human Capital

A

knowledge and skills (includes investments in health and nutrition)

7
Q

Natural Resources

A

provided by nature

renewable or non-renewable

8
Q

Technological Knowledge

A

understanding the best way to produce

  • common knowledge (everyone becomes aware of it)
  • proprietary (only company that discovers it knows it)
9
Q

What can government do to raise productivity and living standards? (6)

A
  • encourage saving and investment
  • encourage investment from abroad
  • encourage education and training
  • establish secure property rights and maintain political stability
  • promote free trade
  • promote research and development
10
Q

diminishing returns

A

A concept in economics that if one factor of production (number of workers, for example) is increased while other factors (machines and workspace, for example) are held constant, the output per unit of the variable factor will eventually become smaller

11
Q

catch up effect

A

the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich

12
Q

Forms of investment from abroad

A

Foreign Direct Investment and Foreign Portfolio Investment

13
Q

Foreign Direct Investment

A

Capital investment owned and operated by a foreign entity

14
Q

Foreign Portfolio Investment

A

investments financed with foreign money but operated by domestic residents

15
Q

Property rights

A

to secure there property (so other people can’t steal it)

16
Q

inward orientated trade policies

A

avoiding interaction with other countries

17
Q

outward orientated trade policies

A

encouraging interaction with other countries