Exam 8: Why Do Economies Grow?

In a simple economy without government or foreign trade, any income not consumed is called

If a firm increases its capital stock per person while holding constant the number of workers employed, the firm is said to experience

Suppose consumers save 3 percent of their incomes. If the government collects 1 dollar in taxes from each taxpayer, private saving will ________ per taxpayer.

A higher saving rate will promote capital deepening.

Recall the Application about the effect of global warming on economic growth to answer the following question(s). -According to this Application, a one degree Celsius rise in temperature

Recall the Application about cultural factors in England and their relevance to the Industrial Revolution to answer the following question(s). In studying the economic history of England before the Industrial Revolution, Professor Gregory Clark found that children of the more affluent members of English society were more likely to survive than those of the less affluent. Coupled with the slow growth of population over several centuries, this differential survival of the wealthy had the effect of creating downward mobility for the rich, as their sons and daughter increasingly populated the society. -According to the Application, the cultural changes in England allowed individuals to take advantage of

Explain the two basic mechanisms that increase GDP per capita over the long term.

-Refer to Figure 8A.1. The stock of capital no longer increases once the economy reaches point

Technological innovations are not necessarily major scientific breakthroughs.

Suppose real GDP was 100 in year 1 and 105 in year 2. The growth rate of real GDP is

Recall the Application about adapting growth accounting to new developments in the economy to answer the following question(s). -Recall the Application. Intangible capital includes all of the following EXCEPT

Capital deepening causes ________ in the demand for labor.

At a 3.5 percent annual growth rate it would take 20 years for GDP per capita to double.

All of the following can cause technological progress EXCEPT

As capital deepening occurs, there will be

-Refer to Figure 8A.1. When the economy reaches K, total saving is represented by point ________ and depreciation is represented by point ________.

Eventually the process of capital deepening comes to a halt as depreciation catches up with total saving.

According to this Application, ________ regimes have difficulty coping with the changes arising from sustained technological progress.

If the stock of capital of a nation is ________ while the population ________, the nation can produce more output, but output per worker falls.

In developing countries, the highest returns are from investing in