4th set

Question 1

Productivity

Answer 1

the average quantity of g&s produced per unit of labor input

Y/L

i.e
Y=real GDP=quantity of output produced
L=quantity of labor

Question 2

What does an increase in K/L cause?

Answer 2

An increase in Y/L

Question 3

What is K/L

Answer 3

K/L= capital per worker

*productivity is higher when the average worker has more capital

Question 4

Human capital

Answer 4

the knowledge and skills workers acquire through education, training, and experience

Question 5

What is H/L

Answer 5

the average workers human capital
*productivity is higher when the average worker has more human capital (education, skills,etc.)

Question 6

What does an increase in H/L cause

Answer 6

an increase in Y/L

Question 7

Natural Resources (N)

Answer 7

the inputs into production that nature provides, e.g, land , mineral deposits

Question 8

What is the effect of N

Answer 8

More N allows a country to produce more Y

Question 9

Do countries need a lot of natural resources to be rich?

Answer 9

No. It can just import the N it needs

Question 10

Technological knowledge

Answer 10

Society’s understanding of the best way to produce g&s

Question 11

The differences between technological knowledge and human capital

Answer 11

technological knowledge refers to a society’s understanding of how to produce g&s
*human capital results from the effort people expend to acquire this knowledge

Question 12

The production function (def)

Answer 12

• a graph or equation showing the relationship between output and inputs

Question 13

The production function (equation)

Answer 13

Y = A x F(L,K,H,N)
where
F() is a function that shows how inputs are combined to produce output
A= the level of technology

Question 14

How can we boots productivity?

Answer 14

Increasing K

Question 15

Diminishing returns to capital

Answer 15

As K rises, the extra ouput from an additioal unit of k falls

Question 16

Property rights

Answer 16

the ability of people to exercise authority over the resources they own

Question 17

Diluting the capital stock

Answer 17

a bigger population equals higher (L) equals lower kaptial/per Labor
-this applies to H as well as K: fast pop.growth = more children= greater strain on educational systsem
-countries with fast pop growth tend to have lower educational attainment

Question 18

Determinants of productivity

Answer 18

K/L, physical capital per worker
H/L, human capital per worker
N/L, natural resource per worker
A, technological knowledge

Question 19

Policies to boost productivity

Answer 19

-encourage saving and investment, to raise K/L
-encourage investment from abroad, to raise K/L
-provide public education, to raise H/L

Question 20

Policies to boost productivity (2):

Answer 20

patent laws or grants, to increase A
-control pop. growth, to increase K/L

Question 21

living standards are determined by what?

Answer 21

productivity