Chapter 7 - good

Question 1

Define Productivity

Answer 1

The quantity of goods and services produced from each unit of labor input.

Question 2

What is the importance of productivity

Answer 2

Higher productivity leads to higher standards of living.

Question 3

What are the factors of production

Answer 3

1. physical capital
2. human capital
3. natural resources
   4.Technological knowledge

Question 4

Define physical capital

Answer 4

The stock of equipment and structures used to produce goods and services.

Question 5

Define human capital

Answer 5

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

Question 6

Define natural resources

Answer 6

Inputs into the production of goods and services provided by nature.

Question 7

Define technological knowledge

Answer 7

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

Question 8

Define production function

Answer 8

A mathematical relationship describing how the quantity of output is produced from the quantities of inputs.

Question 9

PRovide an example of production function

Answer 9

Example:
𝑌=𝐴*F (L,K,H,N)

Y = output
A= technology level
L = labour
K = physical capital
H = human capital
N = natural resources

Question 10

Define diminishing returns

Answer 10

As the quantity of an input increases, the marginal product of that input decreases, holding all other inputs constant.

Question 11

Define catch-up effect

Answer 11

Poorer countries tend to grow more rapidly than richer countries because they can adopt existing technologies.

Question 12

What are the determinants of Productivity

Answer 12

1. Physical capital
2. Human capital
3. Natural resources
4. Technolgical knowledge

Question 13

Defined and provide and example of Physical capital

Answer 13

More tools and equipment lead to higher productivity.

Example: An increase in the number of computers in an office enhances workers’ efficiency.

Question 14

Defined and provide and example of Human Captial

Answer 14

Investment in education and training improves workers’ skills.

Example: A workforce with higher education levels can adopt and implement new technologies more effectively.

Question 15

Defined and provide and example of Natural resources

Answer 15

Availability of resources such as minerals, oil, and fertile land contributes to higher productivity.

Example: Countries with abundant natural resources like Canada benefit from higher productivity in sectors like mining and agriculture.

Question 16

Defined and provide and example of Technological KNowledge

Answer 16

Advancements in technology improve the production process.

Example: The invention of the internet has revolutionized communication and productivity across various industries.

Question 17

What are the policies to promote economic growth

Answer 17

1. savings and investment
2. investment from abroad
3. education and training
4. Health and nutrition
5. property rights and political stability
6. free trade
7. research and development

Question 18

define and provide an example for Savings and investment

Answer 18

Encouraging savings leads to more investment in capital goods.

Example: Tax incentives for saving can increase the capital stock and boost productivity.

Question 19

define and provide an example for Investment from Abroad

Answer 19

Foreign direct investment and foreign portfolio investment bring in capital and new technologies.

Example: Multinational companies setting up factories in developing countries transfer technology and skills.

Question 20

define and provide an example for education and training

Answer 20

Investing in education enhances human capital.

Example: Government scholarships and subsidies for higher education can produce a more skilled workforce.

Question 21

define and provide an example for Health and nutrition

Answer 21

Better health and nutrition improve workers’ productivity.

Example: Public health programs reduce disease and enhance workers’ physical capabilities.

Question 22

define and provide an example for Property rights and political stability

Answer 22

Secure property rights and stable political environments attract investment.

Example: Countries with strong legal systems and stable governments attract more foreign and domestic investment.

Question 23

define and provide an example for Free trade

Answer 23

Open trade policies enable countries to specialize and access larger markets.

Example: Free trade agreements like NAFTA (now USMCA) enhance economic integration and growth.

Question 24

define and provide an example for Research and development

Answer 24

Investing in R&D promotes technological innovation.

Example: Government grants for scientific research lead to new technologies and improved productivity.