Chapter 7: The Wealth of Nations and Economic Growth Flashcards

1
Q

Almost any standard indicator of societal well being tends to increase with ________.

A

wealth

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2
Q

3 facts about the wealth of nations and economic growth

A
  1. GDP per capita varies enormously among nations
  2. Everyone used to be poor
  3. There are growth miracles and growth disasters
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3
Q

What is the world’s poorest country?

A

The Democratic Republic of Congo

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4
Q

The distribution of world income tells us that poverty is _______.

A

normal

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5
Q

Relative to today’s standards. everyone used to be _______.

A

poor

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6
Q

For most of recorded human history there was no long run growth in real __________.

A

GDP per capita

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7
Q

What is the rule of 70?

A

If the annual growth rate of GDP per capita is x% then the amount of time it will take for it to double can be calculated by [ 70/x ]

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8
Q

What is economic growth?

A

The growth rate of real GDP per capita

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9
Q

What is the most immediate cause of the wealth of nations?

A

Countries with a high GDP per capita have a lot of physical and human capital per worker and that capital is organized using the best technological knowledge to be highly productive

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10
Q

What are the factors of production?

A
  1. Physical capital
  2. Human capital
  3. Technological knowledge
  4. Organization
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11
Q

What is physical capital?

A

The stock of tools including machines, structures, and equipment

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12
Q

What is human capital?

A

Tools of the mind;

The productive knowledge and skills that workers acquire through education, training and experience

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13
Q

An investment of time and other resources into your own education or training is an example of ?

A

Human capital

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14
Q

What is technological knowledge?

A

The knowledge of how the world works that is used to produce goods and services.

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15
Q

How is technological knowledge increased?

A

Research and development

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16
Q

Physical capital, human capital, and technology must be combined and organized purposively to be _________.

A

productive

17
Q

What is the key to producing and organizing the factors of production?

A

Institutions that create appropriate incentives

18
Q

What are institutions?

A

The rules of the game that structure economic incentives.
This includes laws and regulations as well as organizations that shape human interaction and structure economic incentives

19
Q

5 institutions of economic growth

A
  1. Property rights
  2. Honest government
  3. Political stability
  4. A dependable legal system
  5. Competitive and open markets
20
Q

What are property rights?

A

They are important institutions for encouraging investment in human and physical capital

21
Q

Under communal property there is little _________ to work.

A

incentive

22
Q

What is free riding?

A

Someone who consumes the benefits of a public good without paying a share of the costs

23
Q

An under-developed legal system can lead to people not knowing who owns what.

True or false?

A

True

24
Q

What does a good legal system do?

A
  1. Facilitate contacts

2. Protect property rights

25
Q

50% of difference in per capita income across countries is explained by differences in ? The other half is explained by a failure to?

A

Physical and human capital;

Use the capital efficiently

26
Q

What do competitive and open markets encourage?

A

The efficient organization of resources

27
Q

What is economies of scale?

A

The advantages of large scale production that reduce average cost as quantity increases

28
Q

Why is it easier for richer countries to continue their growth?

A

They have more physical and human capital and are more likely to have institutions that allow for it