Productivity and growth Flashcards
(10 cards)
1
Q
Why is productivity growth the key determinant of GDP growth
A
Salary increases tend to follow productivity increases
2
Q
What are the determinants of productivity
A
- physical capital
- human capital
- natural resources
- technological knowledge
3
Q
What is the production function
A
Y = AF(L,K,H,N)
Y = output
L = quantity of labour
K = quantity of physical capital
H = quantity of human capital
N = natural resources
A = available technology
4
Q
Define the catch up effect
A
- since each input into the production function has diminishing returns, LICs need less investment to rapidly increase productivity than HICs
- also do not have to fund technological advancements as can just adopt advancements made by HICs
5
Q
How do you invest in human capital
A
- invest in education
- invest in healthcare
6
Q
Name two more determinants from overseas investments
A
- FDI (foreign direct investment)
- FPI (foreign portfolio investment)
7
Q
Factors which influence economic growth
A
- property rights
- political instability
- population growth
8
Q
How do property rights influence economic growth
A
Businesses more likely to invest in capital when they have complete ownership of their assets
9
Q
Why does political instability influence economic growth
A
- business owners and foreigners less likely to invest in uncertainty
- revolutionary governments can seize assets
10
Q
How does population growth influence economic growth
A
- more people stretches capital more thin
- puts more pressure on natural resources
- more chance of innovative ideas
