Deck 9: Growth,productivity,and the Wealth of Nations

Question 1

What are the five sources of growth?

Answer 1

The five sources of growth are:

Question 2

Why is private property a source of growth?

Answer 2

Private property is a source of growth because it provides an incentive for people to produce by creating the possibility of benefiting from their efforts.

Question 3

If you know the percent change in output,what additional information would you need to calculate per capita growth of output? Give an example.

Answer 3

You would need to know population growth rate.Per capita growth = % change in output - % change in population.If a country's output grew at 5% and its population at 2%,per capita growth would be 3%.

Question 4

What is Say's Law? What is the reasoning behind it?

Question 5

How have markets contributed to growth?

Question 6

Explain the convergence hypothesis and give four reasons why convergence has not taken place for many poor countries.

Question 7

Explain the difference between diminishing marginal productivity and decreasing returns to scale.

Question 8

The dire prediction of economic growth based upon the Classical growth model has not been very accurate.What is this prediction and why hasn't it they come true?

Question 9

Six types of government policies designed to promote growth are (1.)Encourage savings and investment.(2.)Formalizing property rights and reducing bureaucracy and corruption (3.)Providing more of the right kind of education.(4.)Promote institutions that encourage technological innovation.(5.)Provide funding for basic research.(6.)Promote policies that allow taking advantage of specialization.Discuss three of these policies.

Question 10

Explain the relationship between the production function,the production possibilities curve,and potential output.

Question 11

What is median income? Why is it a better measurement of living standards than per capita output?

Question 12

List and briefly describe the three types of capital.

Question 13

What are scale economies? List and explain the three types of scale economies.

Question 14

Explain the difference between diminishing marginal productivity and decreasing returns to scale.Describe how diminishing marginal productivity might apply in the agricultural sector.

Question 15

Five important sources of economic growth are (1.)Growth-compatible institutions, (2.)Capital accumulation.(3.)Available resources, (4.)Technological development,and (5.)Entrepreneurship.Discuss three of these sources.

Question 16

What is economic growth and how does it relate to living standards?

Question 17

Economists treat potential output differently when considering the short run than when considering the long run.Explain this difference.

Question 18

Economists once viewed capital accumulation as the key element to economic growth.Why is this no longer the case?

Question 19

What is the Classical growth model? How is it different from new growth theory?

Question 20

What is economic growth? How does it relate to the production possibilities curve model?

Question 21

What role has the proliferation of mutual funds played in economic growth?

Question 22

Demonstrate graphically and explain verbally what would happen to output (according to the Classical growth model)if suddenly people need more food to subsist than was previously thought.

Question 23

Saving and investment are often viewed as among the sources of economic growth.Why are saving and investment more of a challenge in developing countries than in developed countries?

Question 24

List some examples of policies to create institutions that encourage technological innovation.

Question 25

What is the new growth theory?

Question 26

Demonstrate graphically the impact of technological improvements on the production function and the production possibilities frontier.

Question 27

Demonstrate graphically and explain verbally the key differences between the Classical and new growth theories.

Question 28

Which country ishas experiencinged higher growth per capita? Country A whose economy is growing at a 9 percent rate and whose population is growing at a 7 percent rate or country B whose economy is growing at a 2 percent rate and whose population is declining at a 1 percent rate?

Question 29

Demonstrate graphically and explain verbally how,according to the Classical growth model,too many workers can mean that some people will starve.

Question 30

If investment in technology is similar to investment in capital,why does new growth theory separate the two?

Question 31

One of the predictions of the Classical growth model is that the long-run growth in per capita output disappears due to diminishing marginal productivity of labor and capital.Real world experiences suggest otherwise.Explain why.

Question 32

What is the Classical growth model? Explain how,according to this model,saving plays a key role in growth.

Question 33

List four categories (types)of policies designed to promote growth.

Question 34

What are the two principal predictions of the Classical growth model? Do real world examples support these predictions? [Hint: The answers have to do with stationary state and comparisons of growth across countries]

Question 35

While all agree that technology is important,no one is sure what are the best policies that promote technological growth.Explain why this statement is valid.

Question 36

Country A has economic growth of 1.5% per year while country B has economic growth of 2.5% per year.How long will it take for income to double in each country?

Question 37

What is a production function? Write out the production function used in the text and describe how it can be related to the five sources of growth.

Question 38

Explain how free trade among nations is beneficial for economic growth.

Question 39

Would returns to basic education (in terms of increased output)be greater in developed or developing countries? Explain.