Deck 12: Maintaining a Rising Level of Output: The Importance of Economic Growth

Question 1

What is meant by the productivity slowdown? What are the possible explanations for the slowdown? Why did productivity subsequently speed up?

Answer 1

The productivity slowdown refers to a period of time when the rate of growth in productivity, or the amount of output produced per unit of input, decreases. This can have significant implications for economic growth and living standards.

There are several possible explanations for a productivity slowdown. One potential reason is a lack of investment in new technology and capital equipment, which can lead to a decrease in the efficiency of production processes. Additionally, a decrease in innovation and a lack of skilled labor can also contribute to a slowdown in productivity growth. Other factors such as government regulations, changes in the global economy, and shifts in consumer demand can also play a role in slowing down productivity growth.

Productivity subsequently speeds up when these factors are addressed and improvements are made in technology, capital investment, and innovation. For example, increased investment in research and development, the adoption of new technologies, and improvements in education and training can all contribute to a resurgence in productivity growth. Additionally, changes in government policies and regulations that promote competition and efficiency can also help to boost productivity.

Overall, the productivity slowdown can be a complex phenomenon with multiple contributing factors, but addressing these issues can lead to a subsequent increase in productivity growth.

Question 2

What has been the trend in living standards in the United States in the decades following the 1950s? How has this trend influenced the American economic agenda?

Answer 2

The trend in living standards in the United States in the decades following the 1950s has generally been one of improvement. With advancements in technology, increased access to education, and overall economic growth, many Americans have experienced a higher standard of living compared to previous generations. This has been reflected in higher average incomes, improved healthcare, better housing, and increased access to consumer goods and services.

This trend has influenced the American economic agenda in several ways. Firstly, it has led to a focus on policies that promote economic growth and job creation, as a higher standard of living is often associated with a strong and growing economy. Additionally, there has been an emphasis on policies that support education and skill development, as a more educated and skilled workforce is essential for maintaining and improving living standards.

Furthermore, the trend in living standards has also influenced discussions around income inequality and social welfare programs. As some segments of the population have seen greater improvements in living standards than others, there has been a growing awareness of the need to address disparities and ensure that all Americans have the opportunity to benefit from economic growth.

Overall, the trend in living standards in the United States has been a driving force behind many economic policies and priorities, shaping the country's agenda in areas such as education, healthcare, and income inequality.

Question 3

What factors figure prominently in accounting for economic growth in the United States?

Answer 3

Several factors play a significant role in accounting for economic growth in the United States. These include technological innovation, investment in physical and human capital, a stable and efficient financial system, a competitive market structure, and a supportive regulatory environment.

Technological innovation drives productivity growth, which is a key driver of economic expansion. Investment in physical capital, such as infrastructure and machinery, and human capital, through education and training, also contributes to economic growth by increasing the economy's capacity to produce goods and services.

A stable and efficient financial system, including well-functioning capital markets and access to credit, facilitates investment and entrepreneurship, which are essential for economic expansion. Additionally, a competitive market structure encourages firms to innovate and improve efficiency, leading to higher productivity and economic growth.

A supportive regulatory environment that promotes competition, protects property rights, and ensures the rule of law is also crucial for fostering economic growth. This includes policies that encourage entrepreneurship, innovation, and investment while also addressing market failures and externalities.

Overall, these factors work together to drive economic growth in the United States, contributing to improvements in living standards and overall prosperity.

Question 4

Discuss the respective contributions to productivity growth over time made by skill improvements, capital deepening, and efficiency gains.

Question 5

What are the supply and demand factors that decide economic growth? Make a relevant generalization about each one and relate them to the production possibilities curve to illustrate economic growth.

Question 6

Use the production possibilities curve model to show economic growth. Explain why your graph shows growth. What would have to happen in order for growth to occur?

Question 7

Economic growth is shown by the production possibilities curve shifting toward the origin.

Question 8

Denison's work showed that increases in productivity accounted for nearly 70 percent of U.S. growth from 1929 to 1982.

Question 9

Real GDP per capita is calculated by dividing real GDP by population.

Question 10

The Malthusian population principle confirms the notion that food and fiber production will grow faster than population.

Question 11

Real GDP per capita is an ideal measure of living standards and the economic well-being of society's members.

Question 12

Each decade in the post-World War II period has exhibited a rising average annual growth rate in output per worker-hour.

Question 13

An aging population and slower labor force growth are contributing to a slower rate of increase in U.S. living standards.

Question 14

Macroeconomic instability can slow economic growth.

Question 15

Potential real GDP estimates the real GDP under the assumption that the economy is at full employment and an average number of hours will be worked during the year at an average output per worker-hour.

Question 16

The vicious circle of poverty experienced by lesser-developed nations starts with low consumption spending.

Question 17

Low investment in physical and human capital may be attributed to low saving and insufficient aggregate demand.

Question 18

All people in DCs are experiencing living standards that are below those of ACs.

Question 19

The social and political environment of DCs frequently serves as an obstacle to economic growth.

Question 20

Aggregate supply policies to foster economic growth tend to concentrate upon ensuring sufficient levels of spending to maintain full employment.

Question 21

According to Denison, technological advance accounted for 28 percent of the increase in labor productivity from 1929 to 1982.

Question 22

DCs have been reliant upon external funding from ACs to finance development projects.

Question 23

The principal purpose of the World Bank is to make unrestricted grants to DCs.

Question 24

The final stage of Rostow's theory of economic development is the take-off stage.

Question 25

Economists have fully explained the productivity slowdown and prescribed the appropriate corrective policies so that it cannot happen again.

Question 26

The pursuit of appropriate technology means adopting large-scale, capital- intensive technology.

Question 27

The United States has the highest living standard in the world based upon real GDP per capita statistics.

Question 28

Advanced countries tend to invest more in human capital than developing countries.

Question 29

The International Bank for Reconstruction and Development has focused its lending on space programs and heavy manufacturing.

Question 30

If a system is "closed," it means that:

A) you can't get out
B) wastes are injected from outside and degrade environmental quality
C) An Inconvenient Truth is the only movie you can watch
D) growth is impossible
E) wastes must be recycled in the long run or environmental quality will degrade
F) the price system cannot be used to manage growth and the environment

Question 31

Answer the next 3 questions based upon the following diagram.


-The country that exhibits the greatest economic growth is:

A) Growlastia with its shift from curve CC to DD
B) Growlastia with its shift from curve DD to CC
C) Hedonia with its shift from curve AA to BB
D) not shown in either diagram

Question 32

Answer the next 3 questions based upon the following diagram.


-Which country has placed more emphasis on capital goods production?

A) Hedonia by choosing combination M
B) Hedonia by choosing N
C) Growlastia by choosing N
D) Growlastia by choosing M
E) A country not shown in the diagram

Question 33

Answer the next 3 questions based upon the following diagram.


-If Hedonia wanted greater growth in the future, what should it do in the present?

A) pay hedonic wages
B) make a production choice similar to Growlastia's point M
C) stop international trade
D) stop producing consumer goods for a couple years
E) none of the above

Question 34

Which of the following statements is correct?

A) the average annual rate of growth in real GDP per capita was considerably slower from 2000-2005 compared to 1995-2000
B) the average annual rate of growth in real GDP per capita since the 1950s has increased
C) living standards in the United States have continuously declined in the post-World War II period
D) output per worker-hour in the United States is the lowest among the industrially advanced nations

Question 35

A major concern about whether living standards can continue to rise in the United States is that:

A) the population will be very young and unskilled beyond the mid-1990s
B) productivity has been growing at more than 7 percent annually
C) the means-wants dilemma has been conquered
D) the population is aging and slower labor force growth

Question 36

Potential real GDP:

A) is the amount of real output that has been produced in a given year
B) is the amount of real output that can be produced under the assumption of high unemployment
C) has exhibited a downtrend over the past three decades
D) is an estimate of the amount of real output the economy could produce assuming full employment

Question 37

Which of the following is a plausible explanation for the U.S. growth slowdown?

A) macroeconomic instability
B) poorer quality of labor
C) increasing age composition of the population
D) all of the above

Question 38

Developing countries are characterized by:

A) rapid population growth
B) inadequate infrastructure
C) low rates of saving
D) all of the above

Question 39

The World Bank:

A) makes loans to industrially advanced countries to finance military hardware
B) acquires funds from industrially advanced countries and makes loans to lesser-developed countries for development projects
C) operates an international system of automated teller machines
D) none of the above

Question 40

All of the following could be considered as a hindrance to economic development in DCs except:

A) low rates of saving
B) low investment in real and human capital
C) capital flight
D) stable political systems

Question 41

"Dualism" refers to:

A) the circular causation of lesser development
B) economies based upon jousting or gunfights with pistols at fifty paces
C) the enclaves of development that exist on a limited scale in DCs while the majority of the population lives in poverty
D) a Japanese management technique that raises productivity

Question 42

The appropriate technology movement:

A) favors labor-intensive technology that uses local resources and produces goods for local markets
B) favors a capital-intensive, capitalist scheme of economic development
C) advocates the adoption of futuristic technologies that might ultimately be supplied by extraterrestrial visitors
D) uses virtual reality technology to provide the impression of a comfortable living environment in DCs
E) relies on export-led growth as the cornerstone for economic development

Question 43

Which of the following is a policy designed to accelerate technological progress?

A) personal income tax reductions to encourage greater work effort
B) development loans for sewer systems
C) higher corporation tax rates
D) a research and development tax credit

Question 44

The Malthusian problem is:

A) too many dollars chasing too few goods
B) that society will be forced to the subsistence level because population grows geometrically while food and fiber grows arithmetically
C) trade barriers obstruct technology transfer
D) a means of calculating interest on development bank loans
E) uneven returns on human capital

Question 45

Critics of economic growth argue that:

A) economic growth is the only way to a better life
B) we need a faster working day
C) the negative by-products of economic growth in the form of environmental degradation, unnecessary complexity and bureaucracy, and products of dubious value warrant rethinking the value assigned to economic growth
D) economic growth has succeeded in alleviating poverty, discrimination, and income inequality
E) because web-based pornography has been growing and profitable, investment should be concentrated there rather than on other products

Question 46

Advovates of "sustainability":

A) are "eco-bully" extremists
B) are concerned with the ecological viability and impacts of economic growth
C) argue that all current environmental damage should be tolerated because it is future generations' responsibility to devise solutions
D) heavily discount environmental costs

Question 47

The Club of Rome:

A) has made forecasts over the past several decades of collapse in world economic growth
B) tries to reconcile economics with religion
C) is a club that researches strategies for delivering faster economic growth on a global basis
D) recently moved to Milan
E) has generally made optimistic projections about resource depletion, environmental damage and population trends, rejecting Malthusian beliefs

Question 48

The rule of 70:

A) refers to the new retirement age in the United States
B) is the number of business cycles on record in the United States
C) is the percentage that labor productivity must contribute to growth in order to maintain rising living standards
D) is a quick calculation of how long it will take something to double given its prevailing growth rate

Question 49

World bank data reveal that:

A) over 80 percent of the world's population is living in a high-income country
B) a pretty even distribution is common in developing countries
C) more than 80 percent of the world's population is living in a low- or middle-income country
D) the world's population is migrating to islands in search of higher living standards
E) capital deepening did not occur in the United States