growth

Question 1

economic development

Answer 1

improvements in living standards and in the quality of life

Question 2

economic growth

Answer 2

measures only growth in economic production

Question 3

factors of production

Answer 3

labor and capital

Question 4

value added

Answer 4

the value of output minus the value of inputs used in production

Question 5

factor abundance

Answer 5

the relative availability of the different factors of production

Question 6

production function

Answer 6

a mathematical expression of the joint effect of the factors of production on output

Question 7

cobb douglas production function

Answer 7

Y = AtKtαLt(1-α)

Question 8

constant returns to scale

Answer 8

if we multiply each factor by the same number, output is also multiplied by that number

Question 9

factor productivity

Answer 9

the contribution of each factor of production to output

Question 10

average labor productivity

Answer 10

national output divided by total employment in the economy. how much on average one worker contributes to national output in a given year

Question 11

capital intensity

Answer 11

Kt/Lt, how much capital there is per worker

Question 12

marginal productivity

Answer 12

the output increase caused by an additional unit of labor (or capital) in the economy

Question 13

diminishing marginal productivity

Answer 13

the more labor (or capital) added to the economy, the smaller the additional output that will be generated

Question 14

factor shares

Answer 14

the share of national income used as payment for the share of capital (or labor) in production

Question 15

growth accounting

Answer 15

estimates what percentage of an economy’s growth rate we can explain using the growth rate of the labor force, the growth rate of the capital stock, and residual factors

Question 16

growth rate of total factor productivity

Answer 16

parameter a

Question 17

total factor productivity

Answer 17

the part of output that labor and capital cannot explain. institutional reforms and technical progress

Question 18

human capital

Answer 18

knowledge embodied in people

Question 19

income convergence

Answer 19

prediction of solow model: poor countries should grow faster than rich countries because they have a higher marginal product of capital. eventually, the income gap should tighten and countries should all converge on the same steady state.

Question 20

endogenous growth theory

Answer 20

suggests that growth is generated by endogenous technical change resulting from entrepreneurial innovation

Question 21

knowledge

Answer 21

not necessarily embodied in people, in principle can grow boundlessly and can accumulate indefinetly

Question 22

non-rival good

Answer 22

a good that can still be consumed by the seller even after it is sold

Question 23

excludable good

Answer 23

a seller can exclude others from its consumption

Question 24

monopoly rents

Answer 24

extra profits derived from monopoly status

Question 25

extractive or predatory institutions

Answer 25

intended to exploit the colonized country’s resources

Question 26

assumptions of solow growth model production function

Answer 26

• production function exhibits constant returns to scale
• total savings are a constant share s of income: S = sY
• technological progress is exogenous

Question 27

simplifying assumptions of solow growth model production function

Answer 27

• fiscal balance (no government expenditure/revenus)
• closed economy
• constant rates of population growth, n

Question 28

capital accumulation equation solow

Answer 28

Kt+1 = sYt + (1-δ)Kt

Question 29

solow growth model: equilibirum equation in per worker terms

Answer 29

(1+n)kt+1 = sAk𝛼t + (1-𝛿)kt

Question 30

capital accumulation equation solow meaning in words

Answer 30

the capital in the next period essentially equals to the value of capital we have saved up to time t subtracting the depreciated value and adding the amount of capital we are going to save in the current period

Question 31

steady state per-capita capital equation solow

Answer 31

k* = (sA /(n+δ) ^ 1 / (1-α)

Question 32

steady state per-capita income equation solow

Answer 32

y* = A ^ 1 / (1-α) ( s / (n+δ)) ^ α / 1- α

Question 33

solow: what happens to steady state equilibirum and growth rate when savings rate increases

Answer 33

higher output per worker and higher capital per worker

Question 34

solow: what happens to steady state equilibirum and growth rate with higher population growth rates

Answer 34

High population growth rates lead to lower steady state levels of k and y

Question 35

solow: what happens to steady state equilibirum and growth rate when technology progresses

Answer 35

higher output per worker and higher capital per worker

Question 36

growth accounting equation

Answer 36

gy = a + αgK + (1-α)gL