Term
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Definition
| 70/growth rate = time it takes for any population to double |
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Term
| What are the three sources of growth identified by growth accounting? |
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Definition
1. Growth of Productivity (ΔA/A)
2. Growth of Capital (ΔK/K)
3. Growth of Labor (ΔN/N) |
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Term
| How do you calculate the growth of output? |
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Definition
| ΔY/Y = ΔA/A + ΔK/K + ΔN/N |
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Term
| Of the three sources of growth identified by growth accounting, which one is primarily responsible for the slowdown in U.S. economic growth after 1973? |
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Definition
| Growth in productivity (ΔA/A) |
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Term
| What are some of the reasons given for the decline in U.S. productivity after 1973? |
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Definition
1. Inaccuracies in the measurement of output, such as changes in the quality of output.
2. A "learning curve" effect from the exploding IT (information technology) revolution.
3. Higher oil prices, causing firms in all industrialized nations to conserve energy.
4. Changes in the legal and human environment, such as growing emphasis placed on protecting the environment and worker safety |
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Term
| Suppose the current level of output is 5,000 and the elasitcity of output with respect to labor is 0.7. A 10% increase in labor would increase the current level of output to what? |
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Definition
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Term
| If capital and labor each grow 5% in a year, the elasticities of output with respect to capital and labor sum to one, and productivity grows 2% in the year, by how much does output grow during the year? |
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Definition
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Term
| Labor productivity increased so much in second half of the 1990s because of what? |
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Definition
| Improved information and communications technologies. |
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Term
| The bowed shape of the per-worker production function is caused by |
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Definition
| diminishing marginal productivity of capital |
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Term
| What would be the most likely effect of increasing the number of grants for scientific research? |
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Definition
| There would be a reasonable chance of productivity growth |
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Term
| What is China's GDP growth rate? According to the rule of 70, how many years would it take for China to double its GDP? |
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Definition
China's GDP growth rate is 9%
70/9 = 7.5 years |
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Term
| How much of an effect could problems with measurement of output contribute to the reported post-1973 U.S. slowdown? What kind of things would make up a measurement problem? |
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Definition
Measurement problems could explain up to 1/3rd of the reported post-1973 slowdown.
Measurement problems include not accounting for the increase in quality of things such as computers, since firms will generally produce the same number of computers every year, the measured output does not reflect the increase in quality of computers from year to year. |
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Term
| What are 4 possible explanations for the Post-1973 Slowdown in Productivity Growth? |
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Definition
1. Measurement problems
2. 1973 oil embargo
3. The Legal and Human Environment
4. The "New Industrial Revolution" |
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Term
| What effects did the 1973 OPEC oil embargo have on the U.S.? What is an argument against this theory? |
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Definition
Effects:
Energy prices went up
"Aged" capital stock
Demand for capital decreased
Investment decreased
Inflation decreased consumption
Argument against this theory: Productivity remained low after oil prices decreased.
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Term
| What effects did the Legal and Human Environment have on post-1973 U.S. productivity? |
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Definition
| Since 1973, a cleaner environment and worker safety and health have been emphasized. To the extent that capital and labor devoted to these goals, measured output and productivity will decline. |
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Term
| What effects did the "New Industrial Revolution" have on the post-1973 U.S. productivity decline? What is another name for this? |
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Definition
Information Technology (IT) Revolution
Training: less producing and more learning (temporarily lowered productivity).
Implementing new systems
During the learning process of training and implementing new IT systems, productivity was temporarily depressed. |
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Term
| Over the past year, productivity grew 1%, capital grew 0%, and labor grew 5%. If the elasticities of output with respect to capital and labor are 0.4 and 0.6, respectively, how much did output grow? |
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Definition
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Term
| What are the three income classes, and what do they earn? |
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Definition
1. workers - wages
2. capitalists - profit
3. landlords - rent |
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Term
| According to the Solow model of economic growth, if there is no productivity growth, what will happen to output per worker, and capital per worker in the long run? |
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Definition
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Term
| What two explanations of productivity growth does endogenous growth theory offer? |
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Definition
| accumulation of human capital and technological innovation |
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Term
| What is the difference between production functions in the Solow Growth model and the Endogenous Growth model? |
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Definition
| In the Solow Growth model, the production function exhibits diminishing marginal productivity, while in the Endogenous Growth model, the production function does not exhibit diminishing marginal productivity. |
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Term
| Over the past year, productivity grew 2%, capital grew 1%, and labor grew 1%. If the elasticities of output with respect to capital and labor are 0.2 and 0.8, respectively, how much did output grow? |
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Definition
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Term
| Over the past year, productivity grew 1%, capital grew 2%, and labor grew 2%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did output grow? |
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Definition
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Term
| Why did labor productivity increase so much in the second half of the 1990s? |
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Definition
| Because of improved information and communication technologies. |
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Term
| A new pollution law requires businesses to pay for inspections of their plants by independent pollution-monitoring firms. What effect is this likely to have? |
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Definition
| Reduction in productivity |
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Term
| Output grows by 10%. Capital grows by 10%; ak = 1.0. What is the contribution of labor to output growth? |
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Definition
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Term
| Output grows by 9%. Capital grows by 3%; ak = .5. Labor grows by 5% and aN = .5. What is the contribution of labor, capital, and productivity? |
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Definition
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