Actually Chapter 8

Question 1

What are the two main measures of economic growth?

Answer 1

1. Increase in Real GDP
2. Increase in Real GDP per Capita

Question 2

What does the “Rule of 70” calculate?

Answer 2

The number of years it takes for GDP to double, calculated as 70 divided by the annual growth rate.

Question 3

What is the difference between Real GDP and Nominal GDP?

Answer 3

Real GDP is adjusted for inflation, whereas Nominal GDP is not.

Question 4

Why is Real GDP per capita a better indicator for comparing living standards between countries?

Answer 4

It accounts for population size, providing a more accurate measure of economic well-being per person.

Question 5

What is “catch-up growth”?

Answer 5

The rapid economic growth of poorer countries by adopting technologies from wealthier nations.

Question 6

Name the institutional structures that promote economic growth

Answer 6

Institutional structures that promote growth include strong property rights, patents/copyrights, efficient financial institutions, education, and a competitive market system, free trade.

Question 7

What are the three factors that determine economic growth?

Answer 7

1. Supply Factors
2. Demand Factor
3. Efficiency Factor

Question 8

List the four supply factors crucial for economic growth

Answer 8

1. Natural Resources
2. Human Resources (Labor)
3. Capital Goods
4. Technology Improvements

Question 9

What is the “efficiency factor” in economic growth?

Answer 9

It involves both productive and allocative efficiency to maximize economic output and satisfaction.

The efficiency factor is about how well an economy uses its resources to create the greatest benefit for everyone. It’s not just about making more stuff (quantity), but making the right stuff (quality) in a cost-effective way.

Question 10

How does labor productivity influence economic growth?

Answer 10

Higher labor productivity (output per hour worked) directly increases Real GDP.

Question 11

What is the formula for calculating Real GDP?

Answer 11

Real GDP = Hours of Work × Labor Productivity

Question 12

What are the key contributors to labor productivity growth?

Answer 12

1. Technological Advance (40%)
2. Capital per Worker (30%)
3. Education and Training (15%)
4. Economies of Scale (7%)
5. Resource Allocation (8%)

Question 13

How does technological advancement drive productivity growth?

Answer 13

It improves production techniques, management methods, and overall efficiency, leading to higher output.

Question 14

What is the impact of “economies of scale” on productivity?

Answer 14

It reduces costs per unit as production increases, allowing firms to operate more efficiently.

Question 15

What are the criticisms of economic growth from the “antigrowth” perspective?

Answer 15

It leads to environmental damage, resource depletion, increased stress, and social inequalities.

Question 16

How do proponents defend economic growth?

Answer 16

They argue that it raises living standards, reduces poverty, funds environmental efforts, and promotes innovation.

Question 17

What is the significance of the “technological frontier” for countries like China?

Answer 17

Once countries reach this point, they must innovate to sustain growth rather than relying on existing technologies.

Question 18

hat are the potential reasons for the slowdown in productivity growth after 2010?

Answer 18

1. High Debt Levels
2. Overcapacity
3. Free Internet Products
4. Technological Stagnation

Question 19

What is the role of “resource allocation” in enhancing productivity?

Answer 19

Shifting labor to high-productivity sectors and reducing inefficiencies boosts overall economic output.

Question 20

what exactly is the demand factor?

Answer 20

The “Demand Factor” means that even if a country has the ability to produce more goods and services (due to better resources, technology, or other improvements), it won’t matter unless people, businesses, and the government actually buy those goods and services. If no one is buying, businesses won’t keep producing, which could lead to things like excess stock piling up and workers losing jobs.

So, for an economy to grow smoothly, there has to be enough demand to match the increased production potential. In simple terms, growth depends not just on being able to make more, but on having people ready to buy more too.