Exam 8: Why Do Economies Grow?

Capital deepening will occur as long as total saving is greater than depreciation.

Technological progress can be another mechanism which affects economic growth.

Suppose consumers save 5 percent of their incomes. If the government collects 100 dollars in taxes from each taxpayer, private saving will ________ per taxpayer.

A example of a topic studied in the field of new growth is how incentives for ________ interact with the accumulation of physical capital.

Recall the Application about growth in China and India to answer the following question(s). From 1978 to 2004, China grew at a rate of 9.3 percent per year and India grew at a rate of 5.4 percent per year. -According to this Application, China's and India's GNP per capita are ________ U.S. GNP per capita.

Draw a graph showing the effect of an increase in the saving rate on the production function.

In larger markets, the quest for profit by firms motivates them to be innovative and produce new and more appealing products.

Technological progress directly raises output, but also slows capital deepening.

Do inventions have to be major technological breakthroughs to affect the efficiency of producing goods? Explain.

Recall the Application about the lack of property rights in Peru, and why clear property rights are important for economic growth in developing countries, to answer the following question(s). Clear property rights give owners an incentive to make long-term investments in their property, and are vital for the property owners to be able to borrow funds. -According to this Application, in Peru, producing palm oil is very profitable but is a time consuming process. Producing coca paste, an ingredient in cocaine, is not as costly or as time consuming as the production of palm oil. To switch Peruvian farmers from producing an ingredient used for cocaine to producing the profitable and safe palm oil would require

-Refer to Figure 8A.2. An increase in the saving rate is represented by

Over time, a country's real GDP per capita typically

Suppose the growth rate of GDP in the United States is 4.2 percent. If 1.1 percent and 1.4 percent of GDP growth are due, respectively, to capital and labor growth, the amount resulting from technological progress is

Innovation and incentives to come up with new products and production methods are stifled in larger markets.

Economists who have studied economic growth find strong evidence of convergence.

The factor that ultimately determines the change in the stock of capital, the level of real wages, and the output of an economy is

The contribution to output growth of technological progress is estimated by how much of the output growth can be explained by the growth in inputs.

Growth accounting is a method which measures the contributions to economic growth from what three factors?

Developing countries send their best students for education in developed countries to help develop

The absence of clear property rights inhibits investment and economic growth.