A) number of women working in the home rather than in the workforce.
B) growth rate of the quantity of money.
C) growth rate of human capital.
D) growth rate of the population.
E) limits on international trade in order to keep more of total spending on domestically produced goods.
28) One possible way of achieving faster economic growth is to
A) encourage saving.
B) protect the economy from international trade.
C) limit investment because investment adds nothing to production today.
D) eliminate property rights because they prevent people from using other people's ideas.
E) tax saving so that people spend more and businesses make more profit.
29) Which of the following is NOT a necessary precondition for economic growth?
A) economic freedom
C) property rights
D) free markets
E) ALL of the above are necessary preconditions.
Essay questions: 1) A nation's population was 250 million last year and is 255 million this year. If its real GDP was $8.5 trillion last year and is $8.8 trillion this year, what is its growth rate of real GDP per person?
Answer: Last year real GDP per person equaled ($8.5 trillion)/(250 million) = $34,000 per person. This year, real GDP per person is $34,510 per person. Thus the growth in real GDP per person equals × 100 = 1.5 percent.
2) U.S. real GDP per person grew rapidly in the early 1960s. The table above has U.S. real GDP and population for 1961 and 1962.
a. What was U.S. real GDP per person in 1961?
b. What was U.S. real GDP per person in 1962?
c. Between 1961 and 1962, how rapidly did U.S. real GDP per person grow?
Answer: a. U.S. real GDP per person in 1961 = ($2,432 billion)/(184 million) = $13,217.
b. U.S. real GDP per person in 1962 = ($2,578 billion)/(186 million) = $13,860.
c. The growth rate of real GDP per person equals × 100 = 4.9 percent.
3) Define labor productivity. Discuss the relationship between labor productivity, human capital growth, and technology change.
Answer: Labor productivity is real GDP per hour of labor, so it equals (real GDP) ÷ (aggregate hours). The expansion of human capital and the discovery of new technology are two factors that increase labor productivity. Increasing human capital increases labor productivity because workers' skills and knowledge increase, which allows them to produce more goods and services without boosting aggregate hours. Similarly, the discovery and use of new technologies allows workers to produce more goods and services without increasing aggregate hours.
4) List and explain the three factors that can increase labor productivity.
Answer: The three factors that can increase labor productivity are saving and investment in physical capital, expansion of human capital, and discovery of new technology. Saving and investing in physical capital increases the amount of capital per worker and thereby increases workers' productivity. Increasing the amount of human capital means that workers' skills, knowledge, and talents increase, which thereby increases their productivity. And, the discovery and use of new technologies allows workers to produce more goods and services than before, which increases their productivity.