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1. Economic growth around the world The following table reports real income per person for several different economies in the years 1960 and 2010. It also gives each economy's average annual growth rate during this period. For example, real income per person in Zambia was $1,412 in 1960, and it actually declined to $1,309 by 2010. Zambia's average annual growth rate during this period was 0.15%, and it was the poorest economy in the table in the year 2010. The real income-perperson figures are denominated in U.S. dollars with a base year of 2005. The following exercises will help you to understand the different growth experiences of these economies. Real Income per Person in 1960 Real Income per Person in 2010 Annual Growth Rate Economy (Dollars) (Dollars) (Percent) Austria 9,773 35,031 2.59 Venezuela 7,307 9,762 0.58 Botswana 468 9,515 6.21 Malaysia 1,624 11,863 4.06 Honduras 1,932 3,145 0.98 Zambia 1,412 1,309 -0.15 Indicate which economy satisfies each of the following statements. Statement Austria Botswana Honduras Malaysia Venezuela Zambia This economy experienced the fastest rate of growth in real income per person from 1960 to 2010. O O O O O O This economy had the highest level of real income per person in the year 2010. O O O O O O Consider the following list of four economies. Which economy began with a level of real income per person in 1960 that was well below that of Venezuela and grew fast enough to catch up with and surpass Venezuela's real income per person by 2010? O Botswana O Honduras Malaysia O Zambia2. The determinants of productivity Consider a simple economy whose only industry is fishing. In this industry, productivitythe amount of goods and services a worker can produce per houris measured by the number of sh one fisherman catches per hour. In the following table, match each example to the productivity determinant it represents. Human Capital Natural Resources Physical Capital Technological Examples per Worker per Worker per Worker Knowledge The skills workers develop through training before _ _ , O O O O working on and piloting boats The fertile waters in which the fish feed and breed O O O C) An advanced mapping system that determines the likelihood of finding fish schools in different depths and O O O O locations The boats in the fishing fleet O O O O 3. Productivity and growth policies Consider a small island country whose only industry is weaving. The following table shows information about the small economy in two different years. Complete the table by calculating physical capital per worker as well as labor productivity. Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor. Physical Capital Labor Force Physical Capital per Worker Labor Hours Output Labor Productivity Year (Looms) (Workers) (Looms) (Hours) (Garments) (Garments per hour of labor) Based on your calculations, V in physical capital per worker from 2029 to 2030 is associated with V in labor productivity from 2029 to 2030. Suppose you're in charge of establishing economic policy for this small island country. Which of the following policies would lead to greater productivity in the weaving industry? Check all that apply. [3 Imposing a tax on looms D Sharply increasing the interest rate on student loans to people pursuing advanced degrees in weaving D Offering free public education to every worker in the country [3 Encouraging saving by allowing workers to set aside a portion of their earnings in taxfree retirement accounts 3. Productivity and growth policies Consider a small island country whose only industry is weaving. The following table shows information about the small economy in two different years. Complete the table by calculating physical capital per worker as well as labor productivity. Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor. Physical Capital Labor Force Physical Capital per Worker Labor Hours Output Labor Productivity Year (Looms) (Workers) (Looms) (Hours) (Garments) (Garments per hour of labor) 2029 160 40 2,000 20,000 Based on your calculations, V in physical capital per worker from 2029 to 2030 is associated with V in labor an increase productivity from 2029 to 2 Suppose you're in charge 0' a decrease conomic policy for this small island country. Which of the following policies would lead to greater productivity in the weaving industry? Check all that apply. [3 Imposing a tax on looms D Sharply increasing the interest rate on student loans to people pursuing advanced degrees in weaving D Offering free public education to every worker in the country [3 Encouraging saving by allowing workers to set aside a portion of their earnings in taxfree retirement accounts 3. Productivity and growth policies Consider a small island country whose only industry is weaving. The following table shows information about the small economy in two different years. Complete the table by calculating physical capital per worker as well as labor productivity. Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor. Physical Capital Labor Force Physical Capital per Worker Labor Hours Output Labor Productivity Year (Looms) (Workers) (Looms) (Hours) (Garments) (Garments per hour of labor) Based on your calculations, V in physical capital per worker from 2029 to 2030 is associated with V in labor productivity from 2029 to 2030. a decrease Suppose you're in charge of establishing economic policy for this small island country. Which of the following policies would lead to greater productivity in the weaving industry? Check all that apply. [3 Imposing a tax on looms D Sharply increasing the interest rate on student loans to people pursuing advanced degrees in weaving D Offering free public education to every worker in the country [3 Encouraging saving by allowing workers to set aside a portion of their earnings in taxfree retirement accounts 4. The catch-up effect Consider the economies of Blahnik and Gobbledigook, both of which produce gobs of goo using only tools and workers. Suppose that, during the course of 20 years, the level of physical capital per worker rises by 4 tools per worker in each economy, but the size of each labor force remains the same. Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2021 and 2041. Blahnik Physical Capital Labor Force Output Productivity Year ( Tools per worker) (Workers) (Gobs of goo) (Gobs per worker) 2021 11 30 3,000 |:] 2041 15 30 3,600 |:] Gobbledigook Physical Capital Labor Force Output Productivity Year (Tools per worker) (Workers) (Gobs of goo) (Gobs per worker) :1 :1 2021 8 30 2,400 2041 12 30 3,600 Initially, the number of tools per worker was higher in Blahnik than in Gobb edigook. From 2021 to 2041, capital per worker rises by 4 units in each country. The 4unit change in capital per worker causes productivity in Blahnik to rise by a V amount than productivity in Gobbledigook. This illustrates the V effect. 4. The catch-up effect Consider the economies of Blahnik and Gobbledigook, both of which produce gobs of goo using only tools and workers. Suppose that, during the course of 20 years, the level of physical capital per worker rises by 4 tools per worker in each economy, but the size of each labor force remains the same. Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2021 and 2041. Blahnik Physical Capital Labor Force Output Productivity Year (Tools per worker) (Workers) (Gobs of goo) (Gobs per worker) 2021 11 30 3,000 ED 2041 15 30 3,600 Gobbledigook Physical Capital Labor Force Output Productivity Year (Tools per worker) (Workers) (Gobs of goo) (Gobs per worker) :1 :1 2021 8 30 2,400 2041 12 30 3,600 Initially, the number of tools per worker was higher in Blahnik than in Gobbledigook. From I41, capital per worker rises by 4 units in each country. The 4unit change in capital per worker causes productivity in Blahnik to rise by a V amount than productivity in Gobbledigook. This illustrates the V effect. 4. The catch-up effect Consider the economies of Blahnik and Gobbledigook, both of which produce gobs of goo using only tools and workers. Suppose that, during the course of 20 years, the level of physical capital per worker rises by 4 tools per worker in each economy, but the size of each labor force remains the same. Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2021 and 2041. Blahnik Physical Capital Labor Force Output Productivity Year (Tools per worker) (Workers) (Gobs of goo) (Gobs per worker) 2021 11 30 3,000 2041 15 30 3,600 Gobbledigook Physical Capital Labor Force Output Productivity Year (Tools p catch-up rkers) (Gobs of goo) (Gobs per worker) 2021 30 2,400 human capital 2041 30 3,600 natural resources Initially, the number was higher in Blahnik than in Gobbledigook. From 2021 to 2041, capital per worker rises by 4 units in each technology country. The 4-unit worker causes productivity in Blahnik to rise by a amount than productivity in Gobbledigook. This illustrates the effect.5. Economic growth and public policy Suppose Yamahonda, a Japaneseowned motorcycle manufacturer, builds a production plant in Alabama. This is an example of foreign Y investment in the United States. Which of the following policies are consistent with the goal of increasing productivity and growth in developing countries? Check all that apply. D Increasing taxes on income from savings C] Providing tax breaks and patents for firms that pursue research and development in health and sciences D Protecting property rights and enforcing contracts D Pursuing inwardoriented policies What is a significant factor in longrun economic growth that Robert Fogel, an economic historian, is best known for suggesting? O Improvements in worker health from better nutrition 0 Improvements in technology from the incentives created by a better patent system Q Improvements in the protection of property and enforcement of contracts through the maturation of the civil and criminal justice systems 0 Inward-oriented policies that protect domestic firms from foreign competition 5. Economic growth and public policy Suppose Yamahonda, a Japaneseowned motorcycle manufacturer, builds a production plant in Alabama. This is an example of foreign V investment in the United States. Which of the following policie tent with the goal of increasing productivity and growth in developing countries? Check all that apply. portfolio D Increasing taxes 0 m savings C] Providing tax breaks and patents for firms that pursue research and development in health and sciences D Protecting property rights and enforcing contracts D Pursuing inwardoriented policies What is a significant factor in longrun economic growth that Robert Fogel, an economic historian, is best known for suggesting? O Improvements in worker health from better nutrition 0 Improvements in technology from the incentives created by a better patent system Q Improvements in the protection of property and enforcement of contracts through the maturation of the civil and criminal justice systems 0 Inward-oriented policies that protect domestic firms from foreign competition