1. 2. 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 fish one fisherman catches per hour.

In the following table, match each example to the productivity determinant it represents.

Examples	Human Capital per Worker	Natural Resources per Worker	Physical Capital per Worker	Technological Knowledge
The boats in the fishing fleet
The fertile waters in which the fish feed and breed
An advanced mapping system that determines the likelihood of finding fish schools in different depths and locations
The skills workers develop through training before working on and piloting boats

2.3. Productivity and growth policies

Consider a small island country whose only industry is printing. 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.

Year	Physical Capital	Labor Force	Physical Capital per Worker	Labor Hours	Output	Labor Productivity
(Printing presses)	(Workers)	(Printing presses)	(Hours)	(Books)	(Books per hour of labor)
2016	300	100		5,000	45,000
2017	480	120		4,200	50,400	Based on your calculations, in physical capital per worker from 2016 to 2017 is associated with in labor productivity from 2016 to 2017. 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 printing industry?Check all that apply. Imposing restrictions on foreign ownership of domestic capital Offering free public education to every worker in the country Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts Sharply increasing the interest rate on student loans to people pursuing advanced degrees in printing

3.1. 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 declinedto $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-per-person 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.

Economy	Real Income per Person in 1960	Real Income per Person in 2010	Annual Growth Rate
(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 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.
This economy had the highest level of real income per person in the 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?

Botswana

Honduras

Malaysia

Zambia

4.4. The catch-up effect

Consider the economies of Hermes and Tralfamadore, both of which produce glops of gloop using only tools and workers. Suppose that, during the course of 10 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 2020 and 2030.

Year

Hermes

Physical Capital

Labor Force

Output

Productivity

(Tools per worker)

(Workers)

(Glops of gloop)

(Glops per worker)

2020

11

30

3,000

2030

15

30

3,600

Year	Tralfamadore
Physical Capital	Labor Force	Output	Productivity
(Tools per worker)	(Workers)	(Glops of gloop)	(Glops per worker)
2020	8	30	2,400
2030	12	30	3,600	Initially, the number of tools per worker was higher in Hermes than in Tralfamadore. From 2020 to 2030, capital per worker rises by 4 units in each country. The 4-unit change in capital per worker causes productivity in Hermes to rise by a amount than productivity in Tralfamadore. This illustrates the effect.

5.

5. Economic growth and public policy

Suppose Yamahonda, a Japanese-owned motorcycle manufacturer, builds a production plant in Alabama.

This is an example of foreign 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.

Pursuing inward-oriented policies

Protecting property rights and enforcing contracts

Providing tax breaks and patents for firms that pursue research and development in health and sciences

Imposing restrictions on foreign ownership of domestic capital

Which of the following are possible outcomes of rapid population growth?

A reduction in human capital per worker

A reduction in capital per worker

An increase in technological knowledge

All of the above