Exam 7: Production and Growth

Although growth rates across countries vary, rankings of countries by income remain pretty much the same over time.

A puzzle: The share of GDP devoted to investment was similar for Canada and South Korea over the period 1960-1990. However, South Korea had a 7 percent growth rate of average annual income, while Canada had only a 2.5 percent growth rate. How can this be explained?

Over the past 100 years, Canadian real GDP per person has doubled about every 35 years. If in the next 100 years it doubles every 20 years, then what will Canadian real GDP per person be a century from now?

In medieval Europe, an important technological advance was the use of the padded horse collar for plowing. Once this idea was thought of, other people used it. What does this example illustrate about knowledge?

What do economists call the equipment and structures available to produce goods and services?

A leading environmental group recently published a report contending that humans are running a "resource deficit" because we are using natural resources faster than they can be regenerated. The group claims that this means that economic growth will eventually stop, and will even be reversed. How would an economist respond to this report?

How does productivity explain the differences in standard of living across countries?

Which of the following is considered human capital?

One reason that governments may find it useful to sponsor universities and basic research is that, to a large extent, knowledge is a public good.

Which of the following best describes changes in the average well-being in a country?

In ten years, when you are the owner of a major Canadian corporation, if your corporation opens and operates a branch in a foreign country you will be engaging in foreign direct investment.

How do inward-oriented policies affect a nation's growth?

In 1870, what was the richest country in the world?

Economists generally believe that outward-oriented policies are more likely to foster growth than inward-oriented policies.

Suppose Canadian-based Bombardier decides to close a Canadian factory and move production to a foreign facility. Bombardier then builds and operates a new factory in Mexico. What would the future production from such an investment do?

If a country's saving rate increases, what happens in the long run?

Read the article "Are jobs obsolete?" by Douglas Rushkoff, Special to CNN September 7, 2011 (http://goo.gl/0aUXL). a) What are the main points of the article? b) One of the principles of economics is that a country's standard of living depends on the country's ability to produce goods and services, while one of the main points of the article suggests that productivity is no longer a goal in the U.S. because the American economy is already able to produce enough for all its people. Does the author's opinion contradict the economic principle? c) Economic theory suggests that technological innovation is an important factor of economic growth. The article, on the other hand, opines that new technologies destroy more jobs than they create. Is this statement true? (Look for extra information that might or might not support this statement.) Does this statement contradict economic theory?

Suppose that over the past ten years productivity grew faster in Cayo than in San Marcos and the population of both countries was unchanged. What can we conclude?

In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?

The following is a comment to the article "Are jobs obsolete?" by Douglas Rushkoff, Special to CNN September 7, 2011 (http://goo.gl/0aUXL): Karaya: "We are at the point where the growth of human population becomes liability rather than asset. Higher sustainable standards of living can be maintained with much less population, and population growth actually can lead to humankind decline - just by depletion of environmental resources alone." Karaya's comment implies that lower population would actually increase standards of living due to advances in technology. What do theories of growth have to say about the effect of population increase on economic prosperity? Is there a connection between a country's population, its technology, and its standard of living? What kind of information would you need to try to answer this question? How would an answer to this question look like?