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Macroeconomics > Week 2 > Flashcards

Week 2 Flashcards

1
Q

‘rule of 70’

A

even small differences in growth rates are magnified over time

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2
Q

doubling time for a variable =

A
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3
Q

sources of long run growth

A
  • increase in
    • productivity
    • physical capital
    • human capital
  • technological progress
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4
Q

(labor) productivity

A

output per worker

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5
Q

physical capital

A

man-made resources

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6
Q

increase in human capital

A

improvements in labor created by education and knowledge of workforce

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7
Q

technological progress

A

advance in technical means of production of g+s

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8
Q

aggregate production function

A

hypothetical function that shows how productivity depends on the

  • quantity of physical capital per worker
  • quantity of human capital per worker
  • state of technology
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9
Q

aggregate production function equation (GDP per worker)

A
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10
Q

diminishing returns to physical capital

A

holding

  • amount of human capital per worker
  • state of technology

fixed, each successive increase in quantity of physical capital per worker leads to smaller increase in productivity

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11
Q

aggregate production function graph

A
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12
Q

why might diminishing returns to physical capital disappear?

A

if we don’t hold ceteris paribus and there is an increase in human capital per worker and/or technology

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13
Q

APF after increase in total factor productivity

A
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14
Q

growth accounting

A

estimates of contribution of each major factor in APF to economic growth

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15
Q

total factor productivity

A

amount of output that can be produced with given amount of factor inputs

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16
Q

what happens when total factor productivity increases?

A

economy can produce more output with same quantity of physical and human capital, and labor

17
Q

What does Robert Gordon argue?

A

new information technology won’t create as much growth as:

  1. electricity
  2. internal combustion engine
  3. running water and central heating
  4. modern chemistry
  5. mass communication, movies, telephones
18
Q

Robert Gordon graph

A
19
Q

why do growth rates differ between countries?

A
  • savings and investment spending
  • education
  • research and development
20
Q

research and development

A

spending to create and implement new technologies

21
Q

factor behind China’s LR growth?

A

increase in human capital as increase numbers of years of education per person

22
Q

what is the role of the government in promoting economic growth?

A
  • government policies
    • subsidizing
      • infrastructure
      • education
      • research and development
    • maintaining well functioning financial system
  • protect property rights
  • political stability and good governance
23
Q

infrastructure

A
  • roads, powerlines, etc.
  • underpinnings for econ activity
24
Q

why did the UK fall behind Germany and the US growth wise?

A

barriers to education

25
Q

what caused East Asia’s miracle?

A
  • very high savings rates that allowed businesses to borrow and add more physical capital per worker
  • very good basic education
  • substantial technological progress
26
Q

what is holding Latin American back?

A
  • government actions leading to high inflation eroding savings
  • lack of emphasis on education
  • political instability
27
Q

what’s holding Africa back?

A
  • government corruption
  • civil wars and political instability
  • unfavorable geography
28
Q

convergence hypothesis

A

international differences in GDP per capita tend to narrow over time

29
Q

reality of convergence hypothesis

A
30
Q

sustainable LR economic growth

A

LR growth that continues in face of limited supply of natural resources and impact of growth on enviornment

31
Q

important questions to determine sustainable growth

A
  1. how large are supplies of natural resources?
  2. how effective will tech be at finding alternative natural resources?
  3. can LR economic growth continue in face of resource scarcity?
32
Q

market-based incentives to tackle climate change

A
  • carbon tax (tax per unit of carbon emitted)
  • cap and trade (total amount of emissions capped, producers must be licenses to emit)

Macroeconomics (11 decks)

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