ECO 181 Lecture Notes - Lecture 1: Foreign Direct Investment, Diminishing Returns, Physical Capital

46 views10 pages

brownhedgehog102

25 Oct 2016

School

University at Buffalo

Department

Economics

Course

ECO 181

Professor

Monica Cherry

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Real gdp per capita controls inflation and population growth. Increased 13 times in last 140 years. Real gdp is determined by quantity of resources and level of technology. Economic growth is caused by increases in resources or technology (innovation) Production function: relationship between real gdp (output) and resources/technology. Economic growth is % change in y= rate of growth of labor+ rate of growth of capital+ rate of growth in the productivity of capital and labor (due to increases in h or a) Increases in labor explain 50% of gdp growth. Increases in capital are more important for poor countries. Increases in a or h are more important for richer countries. Measures output per worker (divide everything by l) Output per worker=y/l=axf(l/l,k/l,h/l,n/l: a=level of technology, k/l= number of machines per worker, h/l= human capital per worker, n/l= natural resources per worker. A does not decrease as l increases (technology does not diminish as the number of workers increases)

Related Questions

1. Economic growth is measured as an increase in real GDP.

True/False

2. Per capita real GDP

a) is equivalent to the real GDP level.
b) is a measure of the value of output produced and available to an average person.
c) is higher in developing countries.
d) is a measure of an economy's income distribution.
e) is a measure of the GDP per country.

3. Suppose Congress enacts a 5 percent decrease in annual military expenditures. Other things equal, this will be associated with a movement down along the aggregate demand curve.

True/False

4. In relative terms, globalization has affected all countries equally.

True/False

5. There was more immigration in the nineteenth and early twentieth centuries than there is in the present day.

True/False

6. Suppose that Italy's average annual growth rate is 6 percent and Canada's average annual growth rate is 4 percent. Then the time required for Canada's growth rate to double will be 12 years more than the time required for Italy's growth rate to double.

True/False

7. Assume that annual real GDP increases by 4.5 percent and the population size grow by 2.7 percent in a year. The annual percapita real growth rate will be 2.8 percent

True/False

8. Most developing countries

a) have no natural resources.
b) experience slow growth in their labor force.
c) allocate their resources to the production of capital goods.
d) are unable to convert their natural resources into productive inputs.
e) make inefficient use of their technological advancement.

9. Economic statistics show that in compared to First World countries, developing countries have

a) a higher life expectancy.
b) higher productivity rates.
c) lower education levels.
d) lower birthrates.
e) a higher rate of private investment.

silverotter427

Question 3

According to Joseph Schumpeter, the theory of creative destruction describes a process by which

	A	some new products unleash a gale of destruction that drive other new products out of the market.
B		new products unleash a gale of destruction that drives old products out of the market.
C		new products are created by the destruction of capital.
D		the creation of new products never involves the destruction of old products.

Question 4

Which of the following countries had the highest GDP per capita in 2012?

		A Qatar
B		United States
C		Japan
D		Norway

Question 5

________ save a ________ of their income. This ________ capital in their economy and raises economic growth.

	A	Developing countries; large proportion; decreases
B		Developing countries; small proportion; increases
C		High-income countries; large proportion; increases
D		High-income countries; small proportion; increases

Question 6

The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.

A		government
B		households
C		banks
D		firms

Question 7

The U.S. economy has been more stable since 1950.

True

False

Question 8

When the economy reaches a trough in a business cycle, which of the following will occur?

A		Income, production, and employment will continue to fall.
B		Income, production, and employment will begin to rise.
C		Income and production will rise, but employment will continue to fall.
D		Employment rises, but income and production will continue to fall.

Question 9

In a closed economy, what is the relationship between saving and investment?

A		Saving is greater than investment.
B		Investment is greater than saving.
C		Investment is equal to saving.
D		Investment may be greater or smaller than saving.

Question 10

The per-worker production function shows the relationship between ________ per hour worked and ________ per hour worked, holding ________ constant.

A		labor; real GDP; technology
B		capital; real GDP; technology
C		labor; capital; real GDP
D		capital; labor; real GDP

Question 11

New growth theory states that increases in ________ capital will result in ________ at the ________ level.

	A	knowledge; increasing returns to scale; firm
	B	physical; decreasing returns to scale; firm
	C	knowledge; decreasing returns to scale; economy
D		knowledge; increasing returns to scale; economy

Question 12

Which of the following is not a reason why the Industrial Revolution occurred when and where it did?

A		The British government was committed to upholding private property rights.
B		The British government was able to eliminate arbitrary increases in taxes.
C		The British government was able to more easily seize wealth.
D		Institutional changes by the British government helped protect wealth.

Question 13

Growth in real GDP per capita for the world economy was greatest during

A		the seventeenth century.
B		the eighteenth century.
C		the nineteenth century.
D		the twentieth century.

Question 14

Which of the following is a normative statement about economic growth?

A		Economic growth is associated with higher labor productivity growth.
B		Economic growth increases GDP per capita.
C		Economic growth hurts developing countries.
D		Foreign direct investment stimulates economic growth.

Question 15

The effect of a recession on a company like Whirlpool Corporation is such that

A		sales decline more sharply for Whirlpool as compared to firms that do not produce durable goods.
B		profits fall less sharply as compared to firms that do not produce durable goods.
C		the decline in sales is more short-lived as compared to firms that do not produce durable goods.
D		there is no difference in the impact of the recession on its profits as compared to firms that do not produce durable goods.

Question 16

For the recessions in the United States since the 1950s,

A		cyclical unemployment has been non-existent.
B		unemployment rises on average by about 1.2 percentage points 12 months after a recession begins.
C		unemployment falls on average by 2 percentage points 12 months after a recession begins.
D		unemployment rises on average about 5 percentage points 12 months after a recession begins.

Question 17

You are an economic advisor to the president. You are asked to recommend a policy to promote long-term economic growth in the economy. Which of the following policies would you choose?

A		a reduction in sales taxes
B		an investment tax credit
C		a reduction in taxes on luxury yachts
D		All of these

Question 18

In comparison to a government that runs a balanced budget, when the government runs a budget deficit,

	A	the equilibrium interest rate will fall.
	B	business investment will fall.
	C	household savings will fall.
	D	None of these

Question 19

If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined.

A		labor force participation
B		the quantity of goods or services that can be produced by one hour of work
C		the working-age population
D		nominal GDP

Question 20

Policies to promote growth by increasing saving and investment work through

A		decreasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital.
B		increasing the supply of loanable funds, increasing the interest rate, raising the level of investment in physical capital.
C		increasing the supply of loanable funds, lowering the interest rate, lowering the level of investment in physical capital.
D		increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital.

1) Which of the following things would increase the value of Total Factor Productivity (TFP)?

a. A new production method that can produce smaller, more efficient microchips.

b. None of the other answers.

c. A company hires a large amount of workers after building a brand new factory.

d. Foreign investors invest in physical capital.

2) The country of Rupertopia has one factory for all its workers in 2011 and 2012. There were 100 workers in 2011 and 150 workers in 2012. Additionally, there were 200 people living in Rupertopia in 2011 and 1,000 people in 2012. Real GDP was one million dollars in 2011 and two million dollars in 2012. Which of the following statements regarding labor productivity is true:

a. Labor productivity in Rupertopia exhibits constant returns.

b. Labor productivity in Rupertopia exhibits increasing returns.

c. Labor productivity in Rupertopia exhibits diminishing returns.

d. More information is needed to determine whether labor productivity in Rupertopia exhibits diminishing, constant, or increasing returns.

3) Which of the following changes would help to improve a country's productivity level?

a. Improvements in the health of workers

b. None of the other answers.

c. Tuition increases at local Universities

d. A lower birth rate

4) When workers already have a large quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity only slightly. This statement:

a. is an assertion that capital is subject to increasing returns.

b. is made under the assumption that the quantities of human capital, natural resources, and technology are being held constant.

c. represents an unconventional view of the production process.

d. All of the other answers are correct.

5) Economic growth can be influenced by government policies. Which of the following can influence the economy's growth rate?

a. All of the other answers are correct

b. Promoting research and development of technologies

c. Fostering education

d. Maintaining property rights

rosemanatee841

ECO 181 Lecture Notes - Lecture 1: Foreign Direct Investment, Diminishing Returns, Physical Capital

Document Summary

Get access

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related Documents

ECO 181 Lecture Notes - Lecture 7: Physical Capital, Longrun, Human Capital

ECO 181 Lecture Notes - Lecture 9: Human Capital, Longrun, Creative Destruction

ECO 1102 Lecture 4: Chapter 9

Related Questions