5 questions about Production and Growth in ECON.

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 satisfies each of the following statements. Statement Austria Botswana Honduras Malaysia Venezuela Zambia This economy experienced the fastest rate of growth in real income O O O O O O per person from 1960 to 2010. This economy had the highest level of real income per person in the O O O O O O 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? O Botswana O Honduras Malaysia O Zambia2. 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 A way of organizing workers among the printing presses that speeds up the printing process The knowledge workers receive from training sessions on how to use and repair the printing presses The presses used to print documents The trees that are used to create pulp for the production of paper 3. Productivity and growth policies Consider a small island country whose only industry is fishing. 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 (Fishing poles) (Workers) (Fishing poles) (Hours) (Fish) (Fish per hour of labor) 2029 120 60 3,300 23,100 2030 400 100 3,500 49,000 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. an increase a decrease Which of the following policies would lead to greater productivity in the fishing industry? Check all that apply. Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts Imposing restrictions on foreign ownership of domestic capital Subsidizing research and development into new shing technologies ':' Offering free public education to every worker in the country 4. The catch-up effect Consider the economies of Sporon and Tralfamadorian of which produce glops of gloop using only tools and workers. Suppose that, during the course of 30 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 2050. Sporon Physical Capital Labor Force Output Productivity Year (Tools per worker) (Workers) (Glops of gloop) (Glops per worker) 2020 11 30 3,000 2050 15 30 3,600 Tralfamador Physical Capital Labor Force Output Productivity Year (Tools per worker) (Workers) (Glops of gloop) (Glops per worker) 2020 8 30 2,400 2050 12 30 3,600 Initially, the number of tools per worker was higher in Sporon than in Tralfamadorianital per worker rises by 4 units in each country. The 4-unit change in capital per worker causes productivity in Sporon to rise by a amount than productivity in Tralfamador This illustrates the effect.\fUCLIVILY er worker) larger smaller re. From 50, capital per rise by a amount th5. Economic growth and public policy Suppose Yamahonda, a Japanese-owned motorcycle manufacturer, builds a production plant in Alabama. This is an example of foreign v 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. Providing tax breaks and patents for firms that pursue research and development in health and sciences Imposing restrictions on foreign ownership of domestic capital Pursuing inward-oriented policies ' Protecting property rights and enforcing contracts In less developed countries, what does the term brain drain refer to? ' Rapid population growth that increases the burden on the educational system \" Lower productivity due to a malnourished workforce " Rapid population growth that lowers the stock of capital per worker The emigration of highly skilled workers to rich countries nple of foreign investment in th allowing policies portfolio tent with the goal of direct iding tax break its for firms that purs sing restrictions on foreign ownership of dome