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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 gures 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 3,146 0.98 Zambia 1,412 1,309 -0.15 Indicate which economy satises each of the following statements. Statement Austria Botswana Honduras Malaysia Venezuela Zambia This economy experienced the fastest rate of growth in real income /'\\ A A /'\\ /'\\ A per person from 1960 to 2010. This economy had the highest level of real income per person in the A /\\ /'\\ A /'\\ /'\\ year 2010. 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? A Austria -A Botswana A Malaysia 1A Zambia 2. The determinants of productivity Consider a simple economy whose only industry is printing. In this industry, productivitythe amount of goods and services a worker can produce per houris measured by the number of documents one worker prints per hour. In the following table, match each example to the productivity determinant it represents. Natural Human Capital Resources per Physical Capital Technological Examples per Worker Worker per Worker Knowledge The presses used to print documents C C C C A method of coating the paper that goes through the printing 0. m m m presses and signicantly reduces paper jams " The trees that are used to create pulp for the production of paper " The knowledge workers receive from training sessions on how C. C .C .C to use and repair the printing presses " 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 dened 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) 2027 120 60 3,300 23,100 2028 400 100 3,500 49,000 Based on your calculations, V in physical capital per worker from 2027 to 2028 is associated with V in labor productivity from 2027 to 2028. 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. l] Imposing restrictions on foreign ownership of domestic capital l] Sharply increasing the interest rate on student loans to people pursuing advanced degrees in weaving Imposing a tax on looms l7 Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts