Chapter 20 Key Terms

Question 1

aggregate production function:

Answer 1

the process whereby an economy as a whole turns economic inputs such as human capital, physical capital, and technology into output measured as GDP per capita

Question 2

capital deepening:

Answer 2

an increase by society in the average level of physical and/or human capital per person

Question 3

compound growth rate:

Answer 3

the rate of growth when multiplied by a base that includes past GDP growth

Question 4

contractual rights:

Answer 4

the rights of individuals to enter into agreements with others regarding the use of their property providing recourse through the legal system in the event of noncompliance

Question 5

convergence:

Answer 5

pattern in which economies with low per capita incomes grow faster that economies with high per capita incomes

Question 6

human capital:

Answer 6

the accumulated skills and education of workers

Question 7

Industrial Revolution:

Answer 7

the widespread use of power-driven machinery and the economic and social changes that occurred in the first half of the 1800s

Question 8

infrastructure:

Answer 8

a component of physical capital such as roads, rail systems, and so on

Question 9

innovation:

Answer 9

putting advances in knowledge to use in a new product or service

Question 10

invention:

Answer 10

advances in knowledge

Question 11

labor productivity:

Answer 11

the value of what is produced per worker, or per hour worked (sometimes called worker productivity)

Question 12

modern economic growth:

Answer 12

the period of rapid economic growth from 1870 onward

Question 13

physical capital:

Answer 13

the plant and equipment used by firms in production; this includes infrastructure

Question 14

production function:

Answer 14

the process whereby a firm turns economic inputs like labor, machinery, and raw materials into outputs like goods and services used by consumers

Question 15

rule of law:

Answer 15

the process of enacting laws that protect individual and entity rights to use their property as they see fit. Laws must be clear, public, fair, and enforced, and applicable to all members of society

Question 16

special economic zone (SEZ):

Answer 16

area of country, usually with access to a port where, among other benefits, the government does not tax trade

Question 17

technological change:

Answer 17

a combination of invention - advances in knowledge - and innovation

Question 18

technology:

Answer 18

all the ways in which existing inputs produce more or higher quality, as well as different and altogether new products