Production and Growth

Question 1

Productivity

Answer 1

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

Question 2

A county’s standard of living depends on its ability to

Answer 2

produce goods and services

Question 3

How is productivity determined?

Answer 3

Physical capital, human capital, natural resources, and technical knowledge

Y/L=A F(1,K/L,H/L, N/L, where L is labor, H is human capital, N is natural resources, Y is output.
Example Y/L is output per worker.

Question 4

Physical capital

Answer 4

stock of equipment and structures that are used to produce goods and services.
Capital is an input into the production process that in the past was an output from the production process.

Question 5

Diminishing returns

Answer 5

The property whereby the benefit from an extra unit of an input declines as the quantity of the unit of the input increases

Capital is subject to this
An increase in the saving Tate leads to higher growth only for a while

Question 6

catch-up effect

Answer 6

The property whereby countries that start off poor tend to grow more rapidly than countries that start off rich.

Question 7

What are the primary ways to raise productivity and living standards?

Answer 7

Saving and investment, Investments from Abroad, Education, Health and Nutrition, Property rights and political stability, Free trade, Research and development,

Question 8

Malthus, Thomas and stretching natural resources

Answer 8

Said that we will run out of food if population keeps growing, but he was wrong because he underestimated human ingenuity

Question 9

Ways to encourage R&D

Answer 9

Patent process and government-sponsored research

Question 10

Acemoglu

Answer 10

Poor countries are poor because of weak or corrupt governments unable to protect property rights and uphold the rule of law.

Question 11

Threat to property rights

Answer 11

political instability. When revolutions and coups are common, there is doubt about whether property rights will be affected in the future. If a revolutionary government might confiscate the capital of some businesses, as was often true after communist revolutions, domestic residents have less incentive to save, invest, and start new businesses. Foreigners also have less incentive to invest in the country.

Question 12

poor countries are better off pursuing outward-oriented policies

Answer 12

those that integrate the country into the world economy

Question 13

Brain drain

Answer 13

the emigration (exodus) of many of the most highly educated workers to rich countries, where these workers can enjoy a higher standard of living.