Productivity and Growth (6)

Question 1

What is GDP per capita?

Answer 1

It’s a country’s GDP, divided by the number of people. “Capita” means “head”…get it?

Question 2

If two countries both had a GDP of 1 million, but one country had only 50 people while the other had 2 million people, which would be richest? How could you tell?

Answer 2

You’d divide the GDP by the number of people, to get the GDP per capita. The country with the highest number wins!

Question 3

Countries with a high GDP per capita have lower rates of what?

Answer 3

• Infant mortality
• Poverty
• Preventable diseases

Question 4

True or false? American GDP per capita is 8 times higher than it was 100 years ago.

Answer 4

TRUE!

Question 5

What is Productivity?

Answer 5

A country’s ability to produce more output, per worker, per hour.

Question 6

What’s one big reason why some countries are richer than others?

Answer 6

They have higher rates of productivity.

Question 7

How do we figure out a country’s rate of Productivity?

Answer 7

By calculating GDP per capita! Countries with higher GDP per capita are, well, more productive.

Question 8

Review: what are the 3 Factors of Production?

Answer 8

1. Land (ALL natural resources, from dirt to gold to fossil fuels)
2. Labor (workers)
3. Capital (stuff to work with…machines, factories, infrastructure…)

Question 9

What’s the type of Capital we call Human Capital?

Answer 9

Workers’ EDUCATION, KNOWLEDGE, and SKILLS needed to produce things.

Question 10

What kind of capital does education help you to develop?

Answer 10

Human capital!

Question 11

What are the two most important steps to increasing Productivity?

Answer 11

1. Increase the quantity and quality of your Capital

2. More importantly, find more efficient ways to organize and use the Capital you already have (“technology”)

Question 12

What do economists mean by Technology?

Answer 12

The good ideas about how to more effectively combine the labor and capital a society already has.

Question 13

Why is CONNECTING the labor and capital we already have (for example, making an app that lets customers, factories, and shippers all communicate around the world) better than increasing capital (for instance, just building more factories)?

Answer 13

Because building new factories costs money and labor to build and maintain….BUT finding new ways to use what already exists is basically free. Both increase productivity, but obviously the free option leaves you with more, right?