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1、Chapter 25 /Production and Growth v 1741Chapter 25 Production and GrowthTRUE/FALSE1.If per capita real income grows by 2 percent per year, then it will double in approximately 20 years.ANS:FDIF:1REF:25-0NAT:AnalyticLOC:Productivity and growthTOP:Economic growthMSC:Definitional2.Over the period 1870-
2、2006, the United States experienced an average annual growth rate of real GDP per person of about 4 percent per year.ANS:FDIF:1REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Economic growthMSC:Definitional3.In 2006, income per person in the United States was about 12 times that in India.ANS:TDIF
3、:1REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Economic growthMSC:Definitional4.Over the period 1900-2006, Brazils rate of economic growth exceeded that of China.ANS:TDIF:2REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Economic growthMSC:Definitional5.If a country has a higher level of pro
4、ductivity than another, then it also has a higher level of real GDP.ANS:FDIF:2REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:ProductivityMSC:Analytical6.International data on real GDP per person give us a sense of how standards of living vary across countries.ANS:TDIF:1REF:25-1NAT:AnalyticLOC:Pr
5、oductivity and growthTOP:Real GDPMSC:Definitional7.Real GDP per person in rich countries, such as Germany, is sometimes more than 10 times that of poor countries like Pakistan.ANS:TDIF:1REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Standard of livingMSC:Definitional8.Both the standard of living
6、 and the growth of real GDP per person vary widely across countries.ANS:TDIF:1REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Standard of living | Real GDPMSC:Definitional9.If they could increase their growth rates slightly, countries with low income would catch up with rich countries in about te
7、n years.ANS:FDIF:1REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Economic growth | Catch-up effectMSC:Interpretive10.In the United States real GDP per person is about $44,000, while in some poor countries real GDP per person is less than $3,000.ANS:TDIF:1REF:25-1NAT:AnalyticLOC:Productivity and
8、growthTOP:Economic growthMSC:Definitional11.Although growth rates across countries vary some, rankings of countries by income remain pretty much the same over time.ANS:FDIF:1REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Economic growthMSC:Definitional12.International data on the history of real
9、 GDP growth rates shows that over the last 100 years or so, rich countries got richer and poor countries got poorer.ANS:FDIF:1REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Economic growthMSC:Definitional13.Productivity can be computed as number of hours worked divided by output.ANS:FDIF:1REF:25
10、-2NAT:AnalyticLOC:Productivity and growthTOP:ProductivityMSC:Definitional14.Indonesians, for example, have a lower standard of living than Americans because they have a lower level of productivity.ANS:TDIF:1REF:25-2NAT:AnalyticLOC:Productivity and growthTOP:Productivity | Standard of livingMSC:Inter
11、pretive15.If Country A produces 6,000 units of goods and services using 600 hours of labor, and if Country B produces 5,000 units of goods and services using 450 units of labor, then productivity is higher in Country B than in Country A.ANS:TDIF:2REF:25-2NAT:AnalyticLOC:Productivity and growthTOP:Pr
12、oductivityMSC:Applicative16.Like physical capital, human capital is a produced factor of production.ANS:TDIF:2REF:25-2NAT:AnalyticLOC:Productivity and growthTOP:Physical capital | Human capitalMSC:Interpretive17.Human capital is the term economists use to refer to the knowledge and skills that worke
13、rs acquire through education, training, and experience.ANS:TDIF:2REF:25-2NAT:AnalyticLOC:Productivity and growthTOP:Human capitalMSC:Definitional18.A forest is an example of a nonrenewable resource.ANS:FDIF:1REF:25-2NAT:AnalyticLOC:Productivity and growthTOP:Natural resourcesMSC:Definitional19.Histo
14、rical trends in the prices of most natural resources compared to prices of other goods indicate that natural resources have become scarcer over time.ANS:FDIF:2REF:25-2NAT:AnalyticLOC:Productivity and growthTOP:Natural resourcesMSC:Interpretive20.It is possible for a country without a lot of domestic
15、 natural resources to have a high standard of living.ANS:TDIF:1REF:25-2NAT:AnalyticLOC:Productivity and growthTOP:Natural resources | Standard of livingMSC:Interpretive21.Constant returns to scale is the point on a production function where increasing inputs will no longer increase output.ANS:FDIF:2
16、REF:25-2NAT:AnalyticLOC:Productivity and growthTOP:Constant returns to scaleMSC:Interpretive22.As capital per worker rises, output per worker rises. However, the increase in output per worker from an addition to capital is smaller, the larger is the existing amount of capital per worker.ANS:TDIF:1RE
17、F:25-3NAT:AnalyticLOC:Productivity and growthTOP:Production functionMSC:Analytical23.An increase in the saving rate does not permanently increase the growth rate of real GDP per person.ANS:TDIF:2REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Saving rateMSC:Definitional24.Other things the same, a
18、nother unit of capital will increase output by more in a poor country than in a rich country.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Productivity | Diminishing returnsMSC:Interpretive25.The catch-up effect refers to the idea that poor countries, despite their best efforts, are n
19、ot likely ever to experience the economic growth rates of wealthier countries.ANS:FDIF:2REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Catch-up effectMSC:Interpretive26.Two countries with the same saving rates must have the same growth rate of real GDP per person.ANS:FDIF:1REF:25-3NAT:AnalyticLO
20、C:Productivity and growthTOP:Saving rate | Catch-up effectMSC:Definitional27.When Americans invest in Russia, the income of Russians (that is, Russian GNP) rises by more than does production in Russia (that is, Russian GDP).ANS:FDIF:3REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Foreign investm
21、entMSC:Applicative28.If your company opens and operates a branch in a foreign country, you will be engaging in foreign direct investment.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:International trade and financeTOP:Foreign investmentMSC:Definitional29.Investment in human capital has opportunity costs, but in
22、vestment in physical capital does not.ANS:FDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Opportunity costs | Human capital | Physical capitalMSC:Interpretive30.Incentives for parents to send their children to school, such as small monthly payments to parents if their children have regular
23、attendance, appear to increase school attendance.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Economic growthMSC:Definitional31.A country that made its courts less corrupt and its government more stable would likely see its standard of living rise.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:Pr
24、oductivity and growthTOP:Property rightsMSC:Definitional32.If a country made it easier for people to establish and prove the ownership of their property, real GDP per person would likely rise.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Property rightsMSC:Interpretive33.Economists ge
25、nerally believe that inward-oriented policies are more likely to foster growth than outward oriented policies.ANS:FDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Trade policyMSC:Definitional34.If a rich country reduced subsidies to domestic producers who produce goods for which poor countri
26、es have a comparative advantage, the standard of living in these poor countries would likely rise.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Trade policyMSC:Definitional35.One reason that governments may find it useful to sponsor universities and basic research is that to a large e
27、xtent knowledge is generally a private good.ANS:FDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Public goodsMSC:Interpretive36.The population growth rate tends to be higher in developed countries than in developing countries.ANS:FDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Popul
28、ation growthMSC:Definitional37.In countries where women are discriminated against, policies that increase the likelihood of career success and educational opportunities for women are likely to decrease the birth rate.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Population growthMSC:D
29、efinitional38.Countries with high population growth rates tend to have lower levels of educational attainment.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Population growthMSC:Definitional39.Studies confirm that controlling for other variables such as the percentage of GDP devoted to
30、 investment, poor countries tend to grow at a faster rate than rich countries.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Catch-up effectMSC:Definitional40.An increase in capital increases productivity only if it is purchased and operated by domestic residents.ANS:FDIF:1REF:25-3NAT:
31、AnalyticLOC:Productivity and growthTOP:Foreign investmentMSC:Definitional41.Other things the same, an economys factors of production are likely to be used more effectively if there is an economywide respect for property rights.ANS:TDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Property rig
32、htsMSC:Definitional42.Economist Michael Kremer found that world growth rates fell as population increased.ANS:FDIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Population growthMSC:DefinitionalSHORT ANSWER1.Use the data on U.S. real GDP below to compute real GDP per person for each year. Then
33、 use these numbers to compute the percentage increase in real GDP per person from 1987 to 2005.YearReal GDP (2000 prices)Population1987$6,435,000 million243 million2005$11,092,000 million296.6 millionANS:Real GDP per person in 1987 was $6,435,000/243= about $26,481. Income per person in 2005 was $11
34、,092,000/296.6 = about $37,397. Income per person grew by (37,397 - 26,481)/26,481 = about 41.2 percent.DIF:1REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Real GDP | Economic growthMSC:Applicative2.Why is productivity related to the standard of living? In your answer be sure to explain what pro
35、ductivity and standard of living mean. Make a list of things that determine labor productivity.ANS:The standard of living is a measure of how well people live. Income per person is an important dimension of the standard of living and is positively correlated with other things such as nutrition and l
36、ife expectancy that make people better off. Productivity measures how much people can produce in an hour. As productivity increases, people can produce more (and use less to produce the same amount) and so their standard of living increases.The factors that determine labor productivity include the a
37、mounts of physical capital (equipment and structures), human capital (knowledge and skills), and natural resources available to workers, as well as the state of technological knowledge in society.DIF:2REF:25-1NAT:AnalyticLOC:Productivity and growthTOP:Productivity | Standard of livingMSC:Interpretiv
38、e3.What is a production function? Write an equation for a typical production function, and explain what each of the terms represents.ANS:A production function is a mathematical representation of the relationship between the quantity of inputs used in production and the quantity of output produced us
39、ing these inputs. A typical production function could be written as Y = A F(L, K, H, N), where Y denotes the quantity of output, L the quantity of labor, K the quantity of physical capital, H the quantity of human capital, N the quantity of natural resources, and A is a variable that reflects the av
40、ailable production technology.DIF:2REF:25-2NAT:AnalyticLOC:The Study of economics, and definitions of economicsTOP:Production functionMSC:Interpretive4.What is the difference between human capital and technology?ANS:Technology is society's understanding of production techniques. Human capital is
41、 the labor force's understanding of these ideas. A society may have lots of information available about how to produce goods, but still have lots of people who know little of this information. For example, in the United States there exists information about how best to use a butter churn and how
42、 to make lye soap, but most people know nothing about it.DIF:2REF:25-2NAT:AnalyticLOC:Productivity and growthTOP:Human capital | TechnologyMSC:Interpretive5.The catch-up effect says that countries with low income can grow faster than countries with higher income. However, in statistical studies that
43、 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
44、 ones.ANS:The argument that poor countries will tend to catch up with rich ones is based on the idea that another unit of capital will increase output more in a country that has little capital than one that has much capital. So, for a given share of GDP devoted to investment, a poor country will gro
45、w faster than a rich one.This argument assumes that other things are the same, but share of GDP invested may be lower in a poor country and the productivity of investment may be less. A politically unstable environment where property rights are unprotected or not secure tends to discourage investmen
46、t. A country that has limited trade because of legal restrictions or geography cannot focus on producing what it produces best and so has lower productivity. To get the most out of investment, or even simply to use some types of new investment, requires having workers who have acquired some basic hu
47、man capital.DIF:3REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Catch-up effectMSC:Analytical6.Some data that at first might seem puzzling: The share of GDP devoted to investment was similar for the United States and South Korea from 1960-1991. However, during these same years South Korea had a
48、6 percent growth rate of average annual income per person, while the United States had only a 2 percent growth rate. If the saving rates were the same, why were the growth rates so different?ANS:The explanation is based on the concept of diminishing returns to capital. A country that has a lot of in
49、come, and so a lot of capital, gains less by adding more capital than does a country that currently has little capital. It is easy to envision how a poor country without much capital could increase its output considerably with even a little more capital.DIF:2REF:25-3NAT:AnalyticLOC:Productivity and
50、growthTOP:Investment | Catch-up effect | Diminishing returnsMSC:Analytical7.In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?ANS:In addition to investment in physical and human capital, a country might increase product
51、ivity by (a) specifying and enforcing property rights, (b) encouraging free trade, (c) controlling population growth, and (d) promoting research and development.DIF:2REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:ProductivityMSC:Definitional8.Why does a nations standard of living depend on prope
52、rty rights?ANS:Property rights are an important prerequisite for the price system to work in a market economy. If an individual or company is not confident that claims over property or over the income from property can be protected, or that contracts can be enforced, there will be little incentive f
53、or individuals to save, invest, or start new businesses. Likewise, there will be little incentive for foreigners to invest in the real or financial assets of the country. The distortion of incentives will reduce efficiency in resource allocation and will reduce saving and investment which in turn wi
54、ll reduce the standard of living.DIF:2REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Property rightsMSC:Interpretive9.How do outward-oriented policies affect a nation's productivity?ANS:Most economists believe that poor nations are better off pursuing outward-oriented policies that promote f
55、ree trade. Countries that use their comparative advantage in trade are, in effect, helping themselves through the gains from trade in the same way that nations that develop new technology raise their standard of living. Hence, a country that eliminates trade restrictions will experience the same kin
56、d of economic growth that would occur after a major technological advance. Inward-oriented trade policies are akin to a country choosing to restrict the use of superior technologies.DIF:1REF:25-3NAT:AnalyticLOC:Productivity and growthTOP:Economic growthMSC:Interpretive10.At first patents might seem like a deterrent to growth because in effect they restrict the use of new technology. Yet many economists believe that patents generate growth. Explain why.ANS:Once someone c
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