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Krugman/Wells Macro Chap 6-8
2nd Exam In My Section
18
Economics
Undergraduate 1
03/10/2009

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Term
What is economic growth?
Definition
a sustained increase in real GDP
Term
How the economic growth rate measured?
Definition
by annual growth rate in real GDP
Term
What does the growth rate of real GDP tell you?
Definition
how rapidly an economy is expanding but does not tell us about changes in the standard of living of the population
Term
What is the better measure of a standard of living?
Definition
the real GDP per capita (the real GDP divided by the population)
Term
What is the formula for calculating the years it will take for real GDP per capita of a country to double?
Definition
rule of 70
Term
How does the rule of 70 work?
Definition
the # of years it will take for a variable that grows continuously over time to double equals 70 divided by the variable's annual growth rate
# of years for vari to dub = 70/Vari's annual growth rate
Term
what are the main determinants of diff countries LR Econmic Growth rates differing?
Definition
Labor, Physical capital, human capital, technology (availability of nat resources)
Term
wat is phys capital
Definition
equip and tools avail for workers
Term
wat is humnan capital
?
Definition
the accumulated knowledge/skills workers acquire from edue, training and experience
Term
wat is technology
Definition
the method how a firm turns inputs into output (goods and services)
Term
wat are nat resources
Definition
resources naturally avail in a country
Term
wat is labor productivity measurbed y
Definition
output per worker
Term
labor productivity increases if _____ increases and _____ improves
Definition
capital per worker; techno of production
Term
increases in labor productivity, human capital, and techno advance lead to ___
Definition
an increase in the LR economic growth
Term
T/F:
natural resources are classified as renewable and non-renewable?
availabilityof natural resources alone guarantees economic growth?
Definition
True; False, it can help an economy grow faster, but alone, does not guarantee growth
Term
The aggregate production function is a function that shows ____
Definition
how productivity (real GDP per worker) depends on the quantities of physic capital per worker and human capital per worker as well as the state of technology.
e.g. Aggregate production function: Y/L = f(K/L, H/L, T)
Term
economies grow at diff rates due to diffs in: _____
Definition
savings and investment spending, foreign investment, edu, infrastructure, research and development, political stability, protection of property rights
Term
What does the convergence hypothesis state?
Definition
international diffs in real GDP per capita tend to narrow over time, provided the factors that affect growth, such as edu, infrastructure, and favorable policies and institutions, are held equal across countries.
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