question

what is the key statistic used to track economic growth?

answer

real GDP per capita

question

GDP measures the t______ v______ of an economy's p___ of f____ goods and services

answer

total value, production, final

question

Why do we use REAL GDP when tracking economic growth?

answer

separate changes in the quantity of goods from effects of rising price level

question

We focus on real GDP PER CAPITA because we want to isolate the effect of ....

answer

changes in the population

question

What percentage of the world's people live in countries with a lower standard of living than the US had a century ago?

answer

50%

question

the time it takes a variable that grows gradually over time to double is approximately 70 divided by that variable's annual growth rate - can only be applied to a ____________ growth rate

answer

Rule of 70, positive

question

Which country achieved independence from Great Britain in 1947, became the world's most populous democracy but has also had consistent economic disappointment? No has a large and rapidly growing m_____ class due to a series of reforms that opened the economy to international trade and freed up domestic competition in the 1980's

answer

India, middle

question

Why do economists use real GDP per capita to measure economic progress rather than some other measure, such as nominal GDP per capita or real GDP?

answer

An increase in overall real GDP does not accurately reflect an increase in an average resident's living standard because it does not account for growth in the number of residents. If, for example, real GDP rises by 10% but population grows by 20%, the living standard of the average resident falls. Similarly, an increase in nominal GDP per capita does not accurately reflect an increase in living standards because it does not account for any change in prices. Real GDP per capita is the only measure that accounts for both changes in the population and changes in prices.

question

Although China and India currently have growth rates much higher than the US growth rate, the typical Chinese or Indian household is far poorer than the typical American household?

answer

The US began growing rapidly over a century ago, but China and India have begun growing rapidly only recently. As a result, the living standard of the typical Chinese or Indian household has not yet caught up with that of the typical American household.

question

term that measures output per worker (real GDP divided by number of people working ie labor force)

answer

labor productivity (productivity)

question

Sustained economic growth occurs only when the amount of output produced by the a_________ worker _______ steadily

answer

average, increases

question

Growth in Productivity: 1) Increase in P__________ C________ 2) Increase in h__________ capital 3) t_____________ progress

answer

physical capital, human, technological

question

consists of human-made resources such as buildings and machines

answer

physical capital

question

the improvement in labor created by the education and knowledge embodied in the workforce (more VIP in determinant of growth than p_____ capital)

answer

human capital, physical

question

an advance in the technical means of the production of goods and services (VIP driver of production)

answer

technological progress

question

hypothetical function that shows how productivity (real GDP per worker) depends on the quantities of physical capital per worker and human capital per worker as well as the state of technology (GDP per worker = T x Physical Capital per worker x Human Capital per worker)

answer

aggregate production function

question

What was the explanation for why China grew faster than India between 1978 and 2004?

answer

China's investment spending and technological progress

question

when the amount of human capital per worker and the state of technology are held fixed, each successive increase in the amount of physical capital per worker leads to a smaller increase in productivity (OTHER THINGS EQUAL phenomenon)

answer

diminishing rate of returns to physical capital

question

estimates the contribution of each major factor in the aggregate production function to economic growth (allows us to calculate the effects of greater physical and human capital on economic growth) - we then estimate technological progress by what is left over

answer

growth accounting

question

What raises productivity at any given level of p________ capital per worker, and therefore shifts the aggregate production function upward?

answer

technological progress, physical

question

the amount of output that can be achieved with a given amount of factor inputs (increase in this are central to a country's economic growth)

answer

total factor productivity

question

Other things equal, countries that are abundant in valuable N_______ r_________, such as highly fertile land or rich mineral deposits, have h______ real GDP per capita than less fortunate countries (Middle East: Oil, Ex: Kuwait -- Japan, resource-poor but high GDP per capita; Nigeria (sizable oil deposits) is still very poor)

answer

natural resources, higher

question

Whose view was it that improvements in tech or increases in physical capital would lead only to temporary improvements in productivity because they would always be offset by the pressure of rising population and more workers on the supply of land.

answer

Thomas Malthus

question

Predict the effect of each of the following events on the growth rate of productivity: a) the amounts of physical and human capital per worker are unchanged, but there is significant technological progress. b) the amount of physical capital per worker grows at a steady pace, but the level of human capital per worker and technology are unchange

answer

a) Significant technological progress will result in a positive growth rate of productivity even though physical capital per worker and human capital per worker are unchanged/ b) the growth rate of productivity will fall but remain positive due to diminishing returns to physical capital

question

Output in the econom,y of Erewhon has grown 3% per year over the last 30 years. The labor force has grown 1% per year, and the quantity of physical capital has grown at 4% per year. The average education level hasn't changed. Estimates by economists say that each 1% increase in physical capital per worker, other things equal, raises productivity by 0.3%. a) how fast has productivity in Erewhon grown? b) how fast has physical capital per worker grown? c) how much has growing physical capital per worker contributed to productivity growth? What percentage of productivity growth is that? d) How much has technological progress contributed to productivity growth? What percentage of productivity growth is that?

answer

a) 3% output - 1% increase in labor force = 2% b) 4% physical capital growth - 1% increase in labor force = 3% c) 3% x 0.3% = 0.9% ; 0.9%/2% = 45% of productivity growth from physical capital d) Since human capital hasn't changed, we only subtract physical capital contribution percentage (45%) from the whole (100%) and so technological progress has contributed 55% to productivity growth at 1.1% increase.

question

Multinomics, Inc., is a large company with many offices around the country. It has just adopted a new computer system that will affect virtually every function performed with the company. Why might a period of time pass before employees' producttivity is improved by the new computer system? Why might there be a temporary decrease in employees' productivity?

answer

learning time and adjustment, setbacks in learning a new system (such as accidentally erasing your computer files) may decrease production for a time

question

Natural resources are less important today than __________ and human capital as sources of productivity g_______ in most economies

answer

physical, growth

question

Why do countries have different growth rates? (7)

answer

investment spending, innovation, education, importance of gov policies, property rights, political stability, good governance

question

Why was Japan the fastest-growing major economy in the 1960s?

answer

higher share of GDP spent on investment goods

question

Investment spending must be paid for either out of s______ from domestic households of from foreign households

answer

savings

question

this is spending in an area to create and implement new technologies, R&D conducted by governments, often paid for by ________ sector (one of reasons for US success -> _________ _________ "invented," created an organization whose purpose was to create new ideas year after year in Menlo Park) (ARPANET -> Internet)

answer

Research and Development, private sector, Thomas Edison

question

Role of Gov in Promoting Economic Growth: 1) Policies A. Government Subsidies to i___________ B. Gov subsidies to e________ c. Gov Subsidies to R&D d. maintaining a well-function financial system 2)Protection of _______ ______ 3) Political Stability and Good Governance

answer

infrastructure, education, property rights

question

Government subsidies to i_____________: Ireland a good example (gov installed telecommunications infrastrucutre leading to favored location for high-tech companies -> good economy) Poor infrastructure, such as a power grid that frequently fails and cuts of electricity, is a major obstacle to economic growth in many countries

answer

infrastructure

question

What's one of the most crucial infrastructure elements to nations?

answer

public health care infrastructure (major obstacle in Africa)

question

Government subsidies to _________: human capital is the result of government spending in this area

answer

education

question

theory that a rising stock of knowledge capital creates the foundation for further technological progress as innovation. Government protection of intellectual property rights is critical to furthering technological progress. Makes clear how important the policies of government, institutions, and firms are in fostering tech progress

answer

New Growth Theory

question

the rights of owners of valuable items to dispose of those items as they choose: subset is _____________, the rights of an innovator to accrue the rewards of her innovation

answer

Property Rights, intellectual

question

Why are property rights important?

answer

no one would bother to spend the effort and resources required to innovate if someone else could appropriate that innovation and capture the rewards

question

a government-created temporary monopoly given to an innovator for the use or sale of his or her innovation (it's temporary rather than permanent because it's also in society's interest to eventually encourage c__________)

answer

patent, competition

question

Aside from disruption caused by war or revolution, many countries find that their economic growth suffers due to c_____ among the gov officials who should be enforcing the law.

answer

corruption

question

Even when the gov isn't corrupt, excessive government i______________ can be a brake on economic growth (often the explanation for slow growth in _____ _________)

answer

intervention, Latin America

question

Why did Britain fall behind?

answer

slower to establish universal basic education (restricted to narrow segment of population) leaving Britain with a human capital disadvantage

question

Explain the link between a country's growth rate, its investment spending as a percent of GDP, and its domestic savings?

answer

A country that has high domestic savings is able to achieve a high rate of investment spending as a percent of GDP. This, in turn, allows the country to achieve a high growth rate

question

Us centers of academic biotech research have closer connections with private biotech companies than do their european counterparts. What effect might this have on the pace of creation and development of new drugs in the US vs. Europe?

answer

It is likely that the US will experience a greater pace of creation and dvelopment of new drugs because closer links between private compnaies and academic research centers will lead to more work directly focused on producing new drugs rather than on pure research

question

During the 1990's in the former Soviet Union a lot of property was seized and controlled by those in power. How might this have affected the country's growth rate at that time?

answer

It is likely that these events resulted in a fall in the country's growth rate because teh lack of property rights would have dissuaded people form making investments in productive capacity

question

Which country began an extremely rapid economic ascent in the early 1960s due to high savings rates, very good basic education, and substantial tech progress

answer

South Korea

question

Why was East Asia's high rates of growth unheard of in the past?

answer

Most economic analysts think that East Asia's growth spurt was possible because of its relative backwardness, they could adopt tech that had been developed in US

question

theory that international differences in real GDP per capita tend to narrow over time because the countries that start with lower real GDP per capita tend to have higher growth rates (no guarantee)

answer

convergence hypothesis

question

Why did Latin America Stagnate? 1900 LA considered comparable to economically advanced countries (lots of natural resources, millions of immigrants [Argentina]), but now all but Chile have achieved sustained rapid growth

answer

the rate of savings in these countries have been much lower, irresponsible government policy eroded savings through high inflation, education has been underemphasized, political instability (1980's economist believed that LA was suffering from excessive gov intervention -> reforms, but still only Chile is doing well)

question

Africa's growth has been slow and uneven. What is the most sever factor? What has been lacking as a result of war and general anarchy?

answer

political instability (civil wars which made productive investment spending impossible), education and necessary infrastucture, also no property rights

question

What is part of the reason for Africa's recent success?

answer

rising prices for their exports

question

Differences in the standards of living among the US, Europe, and _____ are relatively s______.

answer

Japan, small

question

reevaluated theory that finds when you adjust for differences in other factors (education, infrastructure, rule of law, etc.), poorer countries do tend to have higher growth rates

answer

conditional convergence

question

Some economist think the high rates of growth of productivity acheived by many Asian economies cannot be sustained. Why might they be right? what would have to happen for them to be wrong?

answer

The conditional version of the convergence hypothesis says that countries grow faster, other things equal, when they start from relatively low GDP per capita. From this we can infer that they grow more slowly, other things equal, when their real GDP per capita is realtively higher. This points to lower future Asian growht. however, other things might not be equal: if Asian economies continue investing in human capital, if saving rates continue to be high, if governments invest in infrastructure, and so on, growth might continue at an accelerated pace

question

Some economists think the best way to help African countries is for wealthier countries to provide more funds for basic infrastructure. Others think this policy willl have no long-term effect unless African countries have the financial and political means to maintain this infrastructure. What policies would you suggest?

answer

evidence suggests that both sets of factors matter: better infrastructure is important for growth, but so is political and financial stability. Policies should try to address both areas

question

long-run growth that can continue in the face of the limited supply of natural resources and the impact of growth on the environment

answer

sustainable long-run economic growth

question

this group of concerns which argues that long-run economic growth wasn't sustainable due to limited supplies of nonrenewable resources such as oil and natural gas

answer

neo-malthusian concerns

question

Economic growth, other things equal, tends to _______ the human impact on the e_____________

answer

increase, environment

question

Historically, which nations have been responsible for the bulk of emissions because they have consumed far more energy per person than p______ countries?

answer

wealthy, poorer

question

The problem with environmental problems is that there isn't incentives for changing behavior because most are _____________ __________, costs that individuals or firms impose on others without having to offer compensation

answer

negative externality

question

Government action needed for counteracting climate change include 1) c_____ tax 2) cap and trade system

answer

carbon

question

Problems with climate change problem 1) L____ view 2) i________ burden

answer

long, international

question

Are economists typically more concerned about the limits to growth imposed by environmental degradation or those imposed by resource scarcity? Explain.

answer

Economists are typically more concerned about environmental degradatino than resources scarcity. The reason is that in modern economies the price response tends to alleviate the limits imposed by resource scarcity through conservation and the development of alternatives. However, because environmental degradation involves a negative externality, effective government intervention is required to address it. As a result, economists are more concerned about the limits to growth imposed by environmental degradation because a market response would be inadequate.

question

What is the link between GHG emissions and growth? What is the expected effect on growth from emissions reduction? Why is international burden sharing of GHG emissions reduction a contentious problem/

answer

Growth increases a country's GHG emissions. The current best estimates are that a large reduction in emissions will result in only a modest reduction in growth. The international burden sharing o f GHG emissions reduction is contentious because rich countrieis are relcutant to pay the costs of reducing their emissions only to see newly emerging countries like China rapidly increase their emissions. Yet most of the current accumulation of gases is due to the past actions of rich countries. Poorer countries like China are equally reluctant to sacrifice their growth to pay for the past actions of rich countries.

Ch 9: Long-Run Economic Growth – Flashcards

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