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Midterm

ECON 2010 Study Guide - Midterm Guide: Physical Capital, Real Interest Rate, Human Capital

13 pages134 viewsFall 2013

Department
Economics
Course Code
ECON 2010
Professor
All
Study Guide
Midterm

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Review for Exam 2
Chapter 7
1. Feature of “compound interest rate” in GDP growth
a.
GDPt
(
1+x
)
n=GDPt+n
b. Rule of 72:
GDPt
(
1+x
)
n=GDPt+n=2GDPtThen , n=72/x
2. GDP per person (a.k.a. GDP per capita) (Y/POP)
=Output per worker (a.k.a. labor productivity) (Y/N) *
Proportion of people employed over population (N/POP)-not employment rate it’s the
number of people employed over population.
3. The factors that improve productivities (examples and differences). For examples:
a. 6 general factors
b. Ways to improve technological change and human capital
4. Human capital. Physical capital, management, entrepreneurship, technology,
government policy
5. Definition and differences of human capital and physical capital
Definition and differences of entrepreneurs and managers
6. Feature of diminishing marginal return of physical capital
7. How legal environment and policies improve GDP growth. For examples:
a. Two channels in globalization: FDI, FPI and their contribution to the GDP growth
b. Property rights, patents and copy rights
c. War
d. Corruption
8. As GDP grows, what factors might be ignored that reduce people’s well-being? For
example:
a. Less consumption in current period
b. Less leisure when GDP grows faster due to longer working hours
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c. More pollution if not well managed
d. Unequal distribution of wealth
-Real GDP per person equals average labor productivity (Y/N): times the share of population
employed
-If real GDP per person in a country equals $20,000 and 40 % of the population is employed
then the average labor productivity equals: 20,000=.4*X.
X=20,000/.4=
-The application of new technology to the production process increases= average labor
productivity. Even technology and 6 other factors.
-_____ start new economic enterprises, while ____ run the enterprise on a day-to-day basis
-entrepreneurs; managers
- entrepreneur contribute to increase average labor productivity in each of the following ways
EXCEPT:
A. introducing new production methods
B. implementing new technology process
C. developing new products
D. Assigning works to jobs
Manager does this.
-Human capital: the talents, training, and education of workers. NOT the factories and
machinery used by humans in production, that is physical capital, not the financial resources
available, and not the factories and machines made by humans
-which of the following is an example of an investment in human capital?
A. a form replaces manually controlled production with a computer-controlled process
B. a firm pays for workers to take college classes
C. a chemical firms supports research to develop new chemicals
D. a firm purchases new equipment for a manufacturing process.
-suppose that the sharer of the population employed in country B is 50 percent and that the
countries B and C have the same real GDP per capita. Based on the information in the table,
what share of country C’s population must be employed?
A- 100 mil pop – 2,000 average labor productivity
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B 150- 10,000
C. 75 25,000
D. 250 50,000
E. 95 60,000
20 percent is the answer?
Population is irrelevant.
-1: 10,000
-2 13,000
3- 15,000
from 1 to 2, increases by 3,000. From 2 to 3 increases by 2,000. 3 to 4 should increase LESS
than 2,000. So should be lower than 17,000. This is diminishing margin of return.
-each of the following statements describe how the political and legal environment encourages
productivity EXCEPT:
- pay rates determined by a gov. planning agency provide workers with the incentive to
work hard. Not true because a teacher could have same rate for 30 years,
- price changes in markets provide suppliers incentives to supply goods to market
- political stability promotes economic growth
-well-defined property tights encourage production and saving
-difference btw FDI and FPI: globalizations
-FDI is involved in another country, send materials and employees oversees, contribute
more in investment. FPI can buy stocks and invest in other countries markets, contribute more
in funds.
-government supports basic research by funding scientists through the national science
foundation is an example of government policy to promote economic growth by:
-improving technologies
-increasing physical capital
-increasing human capital
- to increase future living standards by pursuing higher current rates of investment spending, an
economy must:
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