Econ Test 3

Front 1

Y

Back 1

Real GDP=Qty of output produced

Front 2

L

Back 2

Labor Force

Front 3

Y/L

Back 3

Productivity

Front 4

K

Back 4

Physical Capital

Front 5

H

Back 5

Human Capital

Front 6

N

Back 6

Natural Resources-Input

Front 7

A

Back 7

Technology Advancement-Not an Input

Front 8

Production Function

Back 8

Y = A f(L, K, H, N)

Front 9

Productivity Measured per worker

Back 9

Just Divide K H N by L...(A) is not divided by L becuase it is a level not an input

Front 10

"A" Outside

Back 10

“A” multiplies the function F so improvements in technology allow more output (Y) to be produced from any given combination of inputs.

Front 11

Y

Back 11

Outputs

Front 12

Physical Capital

Back 12

The stock of equipment and structures used to produce g&s...Input

Front 13

Human Capital

Back 13

the knowledge and skills workers acquire through education, training, and experience...input

Front 14

Natural Resources

Back 14

the inputs into production that nature provides...input

Front 15

Technological Knowledge

Back 15

society’s understanding of the best ways to produce g&s

Front 16

Global Fact of Income 1

Back 16

HUGE differences in GDP/person, or living standards, across countries

Front 17

Global Fact of Income 2

Back 17

#2: There is a lot of variation in growth rates of GPD/person across countries

Front 18

Rule 72

Back 18

72 / (growth rate of GDP per person) = # of years for GDP/person to double
ex.

Front 19

Rule 72 Examples

Back 19

Ex: Mexico’s growth rate = 4.5%. How many yrs will it take for incomes to dbl?
72 / 4.5 = 16 yrs for incomes to double
Zimbabwe’s growth rate = -7.7%
72 / -7.7 = -9.35. In 9.35 years, Zimabwe’s income will be cut in half!

Front 20

Returns to Scale (two types)

Back 20

1. Increasing RTS=Double all inputs & receive more than double output...developing countries
2. Decreasing RTS=Double all inputs & receive less than double output...Developed Countries

Front 21

A vs. H

Back 21

A=how to produce...shared by many producers
H=Effort to Aquire Knowledge...usually tied to individual who puts forth effort

Front 22

CRS

Back 22

Constant Returns to Scale...Outputs and Inputs change by same percentage

Front 23

Policy and Growth #1
Boosts?

Back 23

Savings and Investment
Boosts K
tradeoff between current and future consumption.

Front 24

The Catch Up Effect

Back 24

the property whereby poor countries tend to grow more rapidly than rich ones

Front 25

FDI

Back 25

Foreign direct investment (FDI): a capital investment (e.g., factory that is owned & operated by a foreign entity
(ex: Toyota in U.S.)

Front 26

FPI

Back 26

Foreign portfolio investment (FPI): a capital investment financed with foreign money but operated by domestic residents
(Ex: Japanese buy stock in IBM or Apple)

Front 27

Investments From Abroad

Back 27

FDI...FPI

Front 28

Policy and Growth #2
Boosts?

Back 28

Education
Boosts H

Front 29

Policy and Growth #3
Boosts?

Back 29

Health and Nutrition
Boosts H

Front 30

Policy and Growth #4
Boosts?

Back 30

Property Rights and Political Stability
Boosts H N K

Front 31

Brain Drain

Back 31

Emigration of the Highly Educated

Front 32

Policy and Growth #5
Boosts?

Back 32

Free Trade
Boosts A

Front 33

Free Trade

Back 33

Specialization in G&S...Allows Consumption Levels beyond PPF

Front 34

Inward Oriented Policies

Back 34

aim to raise living standards by avoiding interaction with other countries.
Ex: tariffs, quotas, limits on investment from abroad

Front 35

Outward Oriented Policies

Back 35

promote integration with the world economy.
Ex: the elimination of restrictions on trade or foreign investment, the creation of NAFTA

Front 36

Chinas 1930's

Back 36

Began to modernize factories (increased A)
Growth (Y/L) = 3-4% per year

Front 37

China 1950's

Back 37

Implemented the “Great Leap Forward”
Centrally planned gov’t (communism)
State ownership of farmland (communal plots instead of privately owned/operated farms)
Inward-oriented trade– “self sufficiency” (reducing A)
Growth = -10 to -20% per year

Front 38

China 1960-77

Back 38

1960-1977
(no change in A)Still inward-oriented trade (reducing A)
Growth = close to 0% per year

Front 39

China 1979-present

Back 39

(Big Gains in A)Start of the reform; movement away from communism & towards free-market capitalism
Privatized farming (incentives for farmers to produce excess to sell to the market)

Front 40

China Focus

Back 40

Outward Oriented Trade

Front 41

Policy and Growth #6

Back 41

Research and Develoment
Boosts A

Front 42

Policy and Growth #7

Back 42

Population Growth
Boosts A
Decreases H and K and N

Front 43

Hans Rosling

Back 43

-Social changes (changes in H, K, L, N, A) precede economic change (Y/L)
-Role of government type & growth
-Role of Gov’t & Income Gap (variances in Y/L)
-Free trade increases Y/L
-Increases in H/L  increases in Y/L.
-Health (H/L) before Wealth (Y/L)
-Income Distribution