Question 1

A puzzle: The share of GDP devoted to investment was similar for Canada and South Korea over the period 1960-1990. However, South Korea had a 7 percent growth rate of average annual income, while Canada had only a 2.5 percent growth rate. How can this be explained?

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Question 2

In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?

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Question 3

What might the African governments do to foster higher economic growth?

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Question 4

In countries where women are discriminated against, policies that increase their career and educational opportunities are likely to increase the birth rate.

Accepted Answer

It is a common misconception that increasing women's opportunities in education and the workforce will lead to increased birth rates. However, research has shown that as women gain more access to education and career opportunities, they tend to have fewer children and delay childbearing until later in life. This is due to various factors such as increased financial independence, greater control over reproductive choices, and changing societal attitudes towards family size. Therefore, policies that promote gender equality and women's empowerment are important for their own sake, as well as for promoting sustainable population growth.

Question 5

A country that made its courts less corrupt and its government more stable would likely see its standard of living rise.

Accepted Answer

A less corrupt court system and a more stable government would lead to a more favorable business climate, attracting investment and encouraging economic growth, ultimately leading to a rise in the standard of living.

Question 6

Why are property rights important for the growth of a nation's standard of living?

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Question 7

What is a production function? Write an equation for a typical production function, and explain what each of the terms represents.

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Question 8

If the productivity slowdown had not occurred in 1973, the income of the average Canadian today would be about 70 percent higher.

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Question 9

Michael Kremer found that world growth rates have increased as world population has.

Accepted Answer

Michael Kremer's research found that the increase in world population has led to an increase in world growth rates, suggesting that population growth can have positive effects on the economy through the creation of new markets, more innovation and technological advances, and a larger labor force.

Question 10

The catch-up effect says that countries with low income can grow faster than countries with higher income. However, in statistical studies that include many diverse countries, we do not observe the catch-up effect unless we control for other variables that affect productivity. Considering the determinants of productivity, list and explain some things that would tend to prohibit or limit a poor country's ability to catch up with the rich ones.

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Question 11

The productivity slowdown in 1973 appears to be primarily the result of a decrease in the capital to labour ratio.

Accepted Answer

The productivity slowdown in 1973 is attributed to a variety of factors including energy price shocks, changes in the demographic composition of the workforce, a shift from manufacturing to services, and possibly a slowdown in technological innovation, rather than primarily a decrease in the capital to labour ratio.

Question 12

Use the data below to find the growth of income per person (over the entire period, not an annual basis) between the two years listed.
Year Real GDP Population
2000 $915,600 million 30 million
2020 $1,243,800 million 35 million

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Question 13

Why is productivity related to the standard of living? In your answer be sure to explain what productivity and standard of living mean. Make a list of things that determine labour productivity.

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Question 14

What is the difference between human capital and technology?

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Question 15

Compare and contrast the population theories of Malthus and Kremer.

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Question 16

One reason that governments may find it useful to sponsor universities and basic research is that, to a large extent, knowledge is a public good.

Accepted Answer

Knowledge and the discoveries made through research can benefit society as a whole, not just the individual or organization conducting the research. Therefore, governments may invest in universities and basic research to promote the dissemination of knowledge and its application to benefit the public.

Question 17

The annual population growth rate in developed countries is about 1 percent, while the growth rate in developing countries is about 3 percent.

Accepted Answer

The given statement correctly states that the annual population growth rate in developed countries is about 1 percent, while the growth rate in developing countries is about 3 percent.

Question 18

How do inward-oriented policies affect a nation's growth?

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Question 19

Some economists argue that it is possible to raise the standard of living by reducing population growth. As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

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Question 20

Economists generally believe that outward-oriented policies are more likely to foster growth than inward-oriented policies.

Accepted Answer

Outward-oriented policies, such as free trade, foreign investment, and export promotion, are believed to stimulate competition, increase efficiency, and foster innovation, ultimately leading to higher economic growth. Inward-oriented policies, such as import substitution, tariffs, and protectionism, on the other hand, tend to create inefficiencies, reduce competition, and limit technological progress, ultimately hindering economic growth.

Quiz 7: Production and Growth