Production and Growth 6251
49. Economists generally believe that inward–oriented policies are more likely to foster growth than
outward-oriented policies.
a. True
b. False
50. Economists generally believe that policies such as reducing barriers to trade are likely to foster
economic growth.
a. True
b. False
51. If a rich country reduced subsidies to domestic producers of goods that poor countries have a
comparative advantage producing, the standard of living in these poor countries would likely rise.
a. True
b. False
6252 Production and Growth
52. One reason that governments may find it useful to sponsor universities and basic research is that
to a large extent knowledge is generally a private good.
a. True
b. False
53. The population growth rate tends to be higher in developed countries than in developing countries.
a. True
b. False
54. In countries where women are discriminated against, policies that increase the likelihood of career
success and educational opportunities for women are likely to decrease the birth rate.
a. True
b. False
Production and Growth 6253
55. Countries with high population growth rates tend to have lower levels of educational attainment.
a. True
b. False
56. Economist Michael Kremer found that world growth rates fell as population increased.
a. True
b. False
57. A country’s standard of living depends on its ability to produce goods and services.
a. True
b. False
6254 Production and Growth
58. Use the data on U.S. real GDP below to compute real GDP per person for each year. Then use
these numbers to compute the percentage increase in real GDP per person from 1993 to 2012.
Year
Real GDP (2009 prices)
Population
1993
$9,510,800 million
257.8 million
2012
$15,470,700 million
313.85 million
59. Why is productivity related to the standard of living? In your answer be sure to explain what
productivity and the standard of living mean. Make a list of things that determine labor
productivity.
Production and Growth 6255
60. What is a production function? Write an equation for a typical production function, and explain
what each of the terms represents.
61. What is the difference between human capital and technology?
6256 Production and Growth
62. The catch-up effect says that countries with low income can grow faster than countries with
higher income.
However, in statistical studies that include many diverse countries we do not observe the catch-
up-effect unless we control for other variables that affect productivity. Considering the
determinants of productivity, list and explain some things that would tend to prohibit or limit a
poor country‘s ability to catch up with the rich ones.
63. Some data that at first might seem puzzling: The share of GDP devoted to investment was similar
for the United States and South Korea from 1960–1991. However, during these same years South
Korea had a 6 percent growth rate of average annual income per person, while the United States
had only a 2 percent growth rate. If the saving rates were the same, why were the growth rates
so different?
Production and Growth 6257
64. In addition to investment in physical and human capital, what other public policies might a country
adopt to increase productivity?
65. Why does a nation’s standard of living depend on property rights?
6258 Production and Growth
66. How do outward-oriented policies affect a nation‘s productivity?
67. At first patents might seem like a deterrent to growth because in effect they restrict the use of
new technology. Yet many economists believe that patents generate growth. Explain why.
Production and Growth 6259
68. Some economists argue that it is possible to raise the standard of living by reducing population
growth. As an economist interested in incentives rather than coercion, what kind of policy would
you recommend to slow population growth?
69. Compare and contrast the population theories of Malthus and Kremer.
6260 Production and Growth
Problems
1. In order to assess the level of prosperity in a nation in a given year, should we examine the level of
that nation’s real GDP per person, or should we examine the growth rate of that nation’s real GDP
per person?
2. How would an economist typically assess the extent of economic progress in a nation?
3. The level of real GDP is a good measure of economic prosperity, and the growth of real GDP is a
good measure of
__________.
Production and Growth 6261
4. In the United States over the past century, real GDP per person has grown by about
percent per year.
5. Consider the nations of India, Indonesia, and Japan. Over the past century, which of these three
nations has experienced, by far, more rapid economic growth than the other two nations?
6. Consider the nations of Brazil, Mexico, and Pakistan. Over the past century, which of these three
nations has experienced, by far, slower economic growth than the other two nations?
6262 Production and Growth
7. Consider the nations of China, Japan, and the United States. Over the past century, which of these
nations has progressed, in an economic sense, more rapidly than the other two nations?
8. Consider the nations of Canada, the United Kingdom, and the United States. Since 1870, which of
these nations has progressed, in an economic sense, more slowly than the other two nations?
Production and Growth 6263
9. What word do we use to refer to the amount of goods and services produced for each hour of a
worker’s time?
10. John and Miguel are fishermen. When they go fishing, John consistently catches 2 or 3 fish per
hour, while Miguel consistently catches 5 or 6 fish per hour. Miguel’s exceeds that of
John.
11. Susan and Calvin paint houses. Susan consistently paints about 400 square feet of a house’s
exterior per hour, while Calvin consistently paints about 300 square feet per hour. Susan’s
exceeds that of Calvin.
6264 Production and Growth
12. List the four determinants of an economy’s productivity.
13. Which one of the factors of production originates as an output from the production process, and is
subsequently used as an input into the production process?
14. “When workers acquire tools, they become more productive.” This statement reflects the general
fact that is a determinant of productivity.