Week three learning Flashcards
How is productivity defined?
Productivity =
𝑌/𝐿
where
𝑌 is Real GDP (quantity of output)
and 𝐿 is the quantity of labor. It measures the quantity of goods and services produced per unit of labor.
What are the key determinants of living standards?
Key determinants include productivity, which depends on factors like physical capital, human capital, natural resources, and technological knowledge.
What is physical capital?
Physical capital (K) refers to the stock of equipment and structures used to produce goods and services. Productivity increases when the average worker has more physical capital.
What is human capital?
Human capital (H) consists of the knowledge and skills workers acquire through education, training, and experience. Productivity is higher with more human capital per worker.
What are natural resources?
Natural resources (N) are inputs into production provided by nature, such as land, rivers, and mineral deposits. More natural resources per worker can increase productivity, but they are not necessary for high productivity.
What is technological knowledge?
Technological knowledge (A) is society’s understanding of the best ways to produce goods and services. It includes both common knowledge and proprietary knowledge.
Are natural resources or global warming limits to growth?
While some argue that population growth depletes non-renewable resources and limits growth, technological progress can mitigate these limits through more efficient use of resources and alternative solutions.
What is the Production Function?
The Production Function describes the relationship between the quantity of inputs used in production and the quantity of output produced. It is expressed as Y=F(L;K;N;H;A), where each variable represents a different input.
What are returns to scale in the context of production functions?
Returns to scale refer to the effect on output when all inputs are increased by the same proportion. Constant returns to scale mean that doubling all inputs will double the output.
What is the Catch-Up Effect?
The Catch-Up Effect is the property whereby poorer countries tend to grow faster than richer ones, due to having lower levels of capital and thus experiencing higher productivity gains from additional capital investment.
What are the two types of investment from abroad?
Foreign direct investment (FDI) is capital investment owned and operated by a foreign entity, while foreign portfolio investment is financed with foreign money but operated by domestic residents.
What is the role of education in economic growth?
Education is an investment in human capital that increases productivity and wages. It also confers positive externalities and can be supported through public education, despite challenges like brain drain.
How does health and nutrition impact economic productivity?
Improved health and nutrition lead to more productive workers. For example, increased caloric intake has been linked to economic growth, and healthier workers are more productive.
Why are property rights and political stability important for economic growth?
Protecting property rights and maintaining political stability are crucial for fostering economic growth by ensuring that resources are used efficiently and contracts are enforced.
What are the differences between inward-oriented and outward-oriented trade policies?
Inward-oriented policies aim to raise living standards by avoiding interaction with other countries, while outward-oriented policies promote integration with the world economy and can improve productivity and living standards
