Chapter 7

Question 1

Production Function

Answer 1

The relationship between inputs used in production and the quantity of output

Question 2

A production function describes…

Answer 2

A firms inputs and outputs

Question 3

An Aggregate Production Function is? What does it show?

Answer 3

A production function of the whole economy. It shows what goes into producing the output for an overall economy!

Question 4

An Aggregate Production Function with GDP as it’s output includes…

Answer 4

Workforce, human capital, physical capital and technology

Question 5

An Aggregate Production Function with GDP Per Capita includes…

Answer 5

Take a picture human capital per person, physical capital per person and technology per person

Question 6

Components of Economic Growth include..

Answer 6

Physical Capital (infrastructure, the plant equipment firms use), Infrastructure, (roads, etc.), human capital (skills and knowledge ), technology

Question 7

Labor Productivity is

Answer 7

The value produced per worker/ per hr worked

Question 8

What determines how productive workers are?

Answer 8

human capital (knowledge, education and skills), technological change (invention and innovation-how one can apply their knowledge), economies of scale

Question 9

A Healthy Climate / Economic Growth highlights these key points:

Answer 9

Education, Health, Savings / Investment, Infrastructure, Scientific Research

Question 10

What 3 things must be present in an economy for it to succeed?

Answer 10

Human Capital, Physical Capital and Technology

Question 11

What is Capital Deepening? Who can it apply to?

Answer 11

Is the level of capital per person increasing as society increases. It can apply to both “additional human capital per worker”, “additional physical capital per worker”, and apply to years of experience a worker may have

Question 12

What is Economic Convergence?

Answer 12

Is when poorer countries grow faster than richer countries

Question 13

How do economists measure economic growth

Answer 13

Tracking Real GDP

Question 14

Which individual believed that making all individuals equal before law was the single most important trigger of the sustained economic development phase in human history

Answer 14

Deirdre McCloskey

Question 15

Economic Growth Patterns around the world are known as..

Answer 15

Modern Economic Growth

Question 16

What values do economic growth adhere to?

Answer 16

Rule of Law and Protection of Property and Contractual Rights

Question 17

What is the part of economic growth that is unexplained by inputs (physical capital and human capital) called?

Answer 17

Residual which is attributed to growth in technology

Question 18

The widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s is known as

Answer 18

The Industrial Revolution

Question 19

The only way GDP per capita can grow is if

Answer 19

the productivity of the average worker rises or if there is an increase in capital

Question 20

The Compound Growth Rate means..

Answer 20

that we multiply the growth by a base that includes past GDP growth

Question 21

When is increasing population important to the average person?

Answer 21

when the rate of income exceeds the population growth

Question 22

The law of diminishing returns suggests..

Answer 22

that as an economy continues to increase its human and physical capital, the marginal gains to economic growth will diminish

Question 23

Which type of countries benefit the most from capital deepening

Answer 23

Low income countries