Chapter 7: Long Run Economic Growth

Question 1

Labour Productivity

Answer 1

The quantity of goods and services that can be produced by one worker or by one hour of work.

Question 2

Two main factors affect labor productivity:

Answer 2

1. The quantity of capital available to workers
2. The level of technology

Question 3

Technological Change

Answer 3

A change in the quantity of outputs a firm can produce using a given quantity of inputs

Question 4

Sources of technological change:

Answer 4

1. Better machinery and equipment
2. Better means of organizing and managing production
3. Increases in human capital

Question 5

Per Worker Production Function

Answer 5

The relationship between real GDP per hour worked, and capital per hour worked.

Question 6

New Growth Theory

Answer 6

A model of long-run economic growth that emphasizes that tech. change is influenced by economic incentives
–> Determined by the market system.

Question 7

Catch-Up

Answer 7

The prediction is that the level of GDP per capita (or income per capita) in poor countries will grow faster than in rich countries

Question 8

Why does “Catch-Up” not happen?

Answer 8

1. Failure to enforce the law
2. Wars
3. Poor education/health
4. Low saving/ investing