Chapter 7 - Economic Growth

Question 1

Wealthier Nations Have:
1. Higher ___,___,___
2. More ___,___,___
3. Fewer ___
4. More ___

Answer 1

1. infant survival rates, life expectancy, and nutrition.
2. educational opportunities, leisure, and entertainment.
3. conflicts such as civil wars and riots.
4. material goods.

Question 2

Economic Growth is

Answer 2

Measured as the growth rate of Real GDP Per Capita

Question 3

How to Find Real GDP Per Capita

Answer 3

Real GDP/Population Size

Question 4

How to Find Economic Growth

Answer 4

gt = Growth rate of Real GDP Per Capita
yt = Real GDP Per Capita in Time Period t

gt = yt - yt-1/yt -1x100

Question 5

Even __ Growth, sustained over time, produces __ differences in wealth.

Answer 5

Slow, Big

Question 6

Growth build on top of growth through ___ or ___

Answer 6

Compounding Growth, Exponential Growth

Question 7

The Rules Of 70 Does What

Answer 7

Approximates the length of time necessary for a growing variable to DOUBLE.

Question 8

What is the Rule Of 70 Formula

Answer 8

Doubling Time = 70 / Growth Rate (%)

Question 9

What was the “Golden Era”

Answer 9

From the 1950’s - 1970’s Countries saw an average economic growth rate of 4.08% per year.

Question 10

Growth Miracles

Answer 10

• Japan: From 1950 - 1970, Japan grew 8.5% per year.
• South Korea: From 1970 - 1990, South Korea grew 7.2% per year.
• China: From 1950 - 1970, China grew 8% per year.

Question 11

Growth Disasters

Answer 11

• Nigeria: Nigeria has barely grown since 1950. It was poorer in 2005 than in 1974 when high oil prices briefly bumped up its per capita GDP.
• Argentina: In 1900, Argentina was one of the richest
  countries in the world. By 1950, Argentina’s per capita GDP had fallen to half that of the U.S. By 2000 Argentina’s per capita GDP was less than one-third of that of the U.S.

Question 12

The Wealth of Nations are:

Answer 12

The causes of growth in GDP per capita which include
factors of institutions, incentives, production.

Question 13

Factors of Production (3 Terms)

Answer 13

1. Physical capital: the stock of tools including machines, structures, and equipment.
2. Human capital: the productive knowledge and skills that workers acquire through education, training, and experience.
3. Technological knowledge: knowledge about how the world works, that is used to produce goods and services.

Question 14

Institutions are . . .

Answer 14

• the “rules of the game” that structure economic incentives.
• Institutions include laws and regulations but also customs, practices, organizations, and social norms.

Question 15

Institutions of economic growth include? (5 Terms)

Answer 15

• Property rights
• Honest government
• Political stability
• A dependable legal system
• Competitive and open markets

Question 16

What are Property Rights

Answer 16

The authority to determine how a resource is used, whether that resource is owned by government or by individuals.

Question 17

What is a Free Rider

Answer 17

Someone who consumes a resource without working or contributing to the resource’s upkeep.

Question 18

A Dependable Legal System does what?

Answer 18

Creates contracts and protect private parties from expropriating one another.

Question 19

Competitive and open markets are . . .

Answer 19

One of the best ways to encourage the efficient order of resources.

Question 20

Ultimate Causes of Wealth (4 Examples)

Answer 20

• Natural resources: deeper pockets.
• Transportation costs: countries with access to water are more open to trade.
• Landlocked countries have lower per capita GDP than countries with access to a coast.
• History, ideas, geography, and luck are also important to economic growth.