4th set Flashcards
Productivity
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
What does an increase in K/L cause?
An increase in Y/L
What is K/L
K/L= capital per worker
*productivity is higher when the average worker has more capital
Human capital
the knowledge and skills workers acquire through education, training, and experience
What is H/L
the average workers human capital
*productivity is higher when the average worker has more human capital (education, skills,etc.)
What does an increase in H/L cause
an increase in Y/L
Natural Resources (N)
the inputs into production that nature provides, e.g, land , mineral deposits
What is the effect of N
More N allows a country to produce more Y
Do countries need a lot of natural resources to be rich?
No. It can just import the N it needs
Technological knowledge
Society’s understanding of the best way to produce g&s
The differences between technological knowledge and human capital
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
The production function (def)
- a graph or equation showing the relationship between output and inputs
The production function (equation)
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
How can we boots productivity?
Increasing K
Diminishing returns to capital
As K rises, the extra ouput from an additioal unit of k falls
Property rights
the ability of people to exercise authority over the resources they own
Diluting the capital stock
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
Determinants of productivity
K/L, physical capital per worker
H/L, human capital per worker
N/L, natural resource per worker
A, technological knowledge
Policies to boost productivity
-encourage saving and investment, to raise K/L
-encourage investment from abroad, to raise K/L
-provide public education, to raise H/L
Policies to boost productivity (2):
patent laws or grants, to increase A
-control pop. growth, to increase K/L
living standards are determined by what?
productivity
