Chapter 7

Question 1

Productivity

Answer 1

The quantity of goods and services produced from each hour of a worker’s time

Question 2

Determinants of productivity

Answer 2

Physical capital per worker
Human capital per worker
Natural resources per worker
Technological knowledge

Question 3

Physical capital

Answer 3

Stock of equipment and structures that are used to produce goods and services

Question 4

Human capital

Answer 4

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

Question 5

Natural resources

Answer 5

The inputs into production of goods and services that are produced by nature, such as land, rivers, and mineral deposits

Question 6

Technological knowledge

Answer 6

Society’s understanding of the best ways to produce goods and services

Question 7

Diminishing returns

Answer 7

Benefit from an extra unit of an input declines as the quantity of the input increases

Question 8

Catch-up effect

Answer 8

Countries that start off poor tend to grow more rapidly than countries that start off richF

Question 9

Foreign direct investment

Answer 9

Capital investment that is owned and operated by a foreign entity

Question 10

Foreign portfolio investment

Answer 10

An investment that is financed with foreign money but operated domestic residents

Question 11

Externalities

Answer 11

Effect of one person’s actions on the well-being of a bystander

Question 12

Brain drain

Answer 12

The immigration of many of the most highly educated workers to rich countries, where they can enjoy a higher standard of living