Chapter Questions
Who most likely worked longer to buy a dozen eggs: a person living in 2009 or a person living in 1910? Why? LO1
Per capita income is growing at different rates in the following countries: Nepal, 1.1 percent; Kenya, 1.7 percent; Singapore, 7.2 percent; Egypt, 3.9 percent. How long will it take for each country to double its income per person? LO1
Calculate real growth per capita in the following countrics:a. Democratic Republic of Congox population growth = 3.0 percent; real output growth $=-1.8$ percent.b. Estonia: population growth $=-0.4$ percent; real output growth $=4.2$ percent.c. India: population growth $=2.0$ percent; real output growth $=6$ percent.d. United States: population growth $=0.5$ percent; real output growth $=2.5$ percent. LO1
What roles do specialization and division of labor play in economists' support of free trade? LO2
How can an increase in the U.S. saving rate lead to higher living standards? LO2
Demonstrate graphically how the loanable funds market translates savings into investment. What equilibrates saving and investment? $\mathrm{LO} 2$
Name three types of capital and explain the differences among them. $\mathrm{LO} 2$
In what ways do informal property rights limit growth? $\mathrm{LO} 2$
How does growth through technology differ from growth through the accumulation of physical capital? $\mathrm{LO} 2$
Credentialism occurs when a person's academic degrees become more important than his or her actual knowledge. How can credentialism hurt economic growth? $\mathrm{LO} 2$
Using the demand and supply of loanable funds, demonstrate the effect of the following on the interest rate. As a result, what would you expect to be the impact of the change on growth?a. Government increases spending.b. Businesses become more productive.c. The people as a whole save more. $\mathrm{LO} 2$
On what law of production did Thomas Malthus base his prediction that population growth would exceed growth in goods and services? LO3
Why hasn't Thomas Malthus's prediction come true? LO3
If output increases by 20 percent when one of two inputs increases by 20 percent, are there constant returns to scale? Why or why not? LO3
According to the convergence hypothesis, which country will grow faster: the United States or Bangladesh? Why? LO4
List four reasons why convergence might not occur. LO4
If individuals suddenly needed more food to subsist, what would the Classical growth model predict would happen to labor and output? Demonstrate graphically. LO5
How does new growth theory explain the lack of convergence? LO5
What are network externalities and how do they lead to growth? LO5
The graph below shows a production function and the subsistence level of output.a. Does the production function exhibit increasing or decreasing marginal productivity?b. Label a level of population at which the population is expected to grow. What is the surplus output at that population level?c. Label a level of population at which the population is expected to decline. Why is the population declining at this point?d. Label the population at which the economy is in long-run equilibrium. Why is this a long-run equilibrium? LO5(GRAPH CANT COPY)
Explain how each of the following is expected to affect growth:a. Increase in technology.d. Learning by doing.b. Positive externalities.e. Technological lock-c. Patents. in. $\mathrm{LO5}$