下载文档原格式
第23章一国收入的衡量—GDP微观经济学(microeconomics)研究个别家庭和企业如何做出决策，以及它们如何在市场上相互交易。
宏观经济学(macroeconomics)研究整个经济，包括通货膨胀、失业率和经济增长。
一GDP1 定义：国内生产总值(gross domestic product，GDP) 是在某一既定时期一个国家内生产的所有最终物品与劳务的市场价值。
2 组成：GDP（用Y代表）被分为四个组成部分：消费（C）、投资（I）、政府购买（G）、净出口（NX）：Y = C ＋I ＋G ＋NX3 实际GDP与名义GDP：实际GDP=名义GDP-通货膨胀率，衡量的是生产的变动，而不是物价的变动。
4 GDP平减指数：，是经济学家用来检测经济平均物价水平，从而监测通货膨胀率的一个重要指标。
（GDP deflator）5 GDP与经济福利：∙由于GDP用市场价格来评价物品与劳务，它就没有把几乎所有在市场之外进行的活动的价值包括进来，特别是，GDP漏掉了在家庭中生产的物品与劳务的价值。
∙GDP没有包括的另一种东西是环境质量。
∙GDP也没有涉及收入分配。
二衡量收入的其他指标：∙国民生产总值(GNP)：是一国永久居民(称为国民)所赚到的总收入。
它与GDP的不同之处在于：它包括本国公民在国外赚到的收入，而不包括外国人在本国赚到的收入。
∙国民生产净值(NNP)：是一国居民的总收入(GNP)减折旧的消耗。
∙国民收入、个人收入、个人可支配收入第24章生活费用的衡量—CPI一CPI1 定义：消费物价指数(consumer price index，CPI) 是普通消费者所购买的物品与劳务的总费用的衡量标准2 计算：定义篮子→找出价格→计算费用→选择基年并计算指数→计算通货膨胀率消费者物价指数=*1003 衡量生活费用过程中存在的问题替代倾向新产品的引进无法衡量的质量变动。
4 GDP平减指数与消费者物价指数差别1：GDP平减指数反映了国内生产的所有物品与劳务的价格，而消费物价指数反交映了消费者购买的所有物品与劳务的价格。
209WHAT’S NEW IN THE S EVENTH EDITION: There is a new In the News box on “Does Food Aid Help or Hurt?”LEARNING OBJECTIVES: By the end of this chapter, students should understand:how much economic growth differs around the world.why productivity is the key determinant of a country’s standard of living.the factors that determine a country’s productivity.how a country’s policies influence its productivity growth.CONTEXT AND PURPOSE: Chapter 12 is the first chapter in a four-chapter sequence on the production of output in the long run. Chapter 12 addresses the determinants of the level and growth rate of output. We find that capital and labor are among the primary determinants of output. In Chapter 13, we address how saving and investment in capital goods affect the production of output, and in Chapter 14, we learn about some of the tools people and firms use when choosing capital projects in which to invest. In Chapter 15, we address the market for labor.The purpose of Chapter 12 is to examine the long-run determinants of both the level and the growth rate of real GDP per person. Along the way, we will discover the factors that determine the productivity of workers and address what governments might do to improve the productivity of their citizens.KEY POINTS:Economic prosperity, as measured by GDP per person, varies substantially around the world. Theaverage income in the world’s richest countries is more than ten times that in the world’s poorest countries. Because growth rates of real GDP also vary substantially, the relative positions of countries can change dramatically over time.PRODUCTION AND GROWTH210 ❖Chapter 12/Production and Growth∙ The standard of living in an economy depends on the economy’s ability to produce goods and services. Productivity, in turn, depends on the amounts of physical capital, human capital, natural resources, and technological knowledge available to workers.∙ Government policies can try to influence the economy’s growth rate in many ways: by encouraging saving and investment, encouraging investment from abroad, fostering education, promoting good health, maintaining property rights and political stability, allowing free trade, and promoting the research and development of new technologies.∙ The accumulation of capital is subject to diminishing returns: The more capital an economy has, the less additional output the economy gets from an extra unit of capital. As a result, whilehigher saving leads to higher growth for a period of time, growth eventually slows down ascapital, productivity, and income rise. Also because of diminishing returns, the return to capital is especially high in poor countries. Other things equal, these countries can grow faster because of the catch-up effect.∙ Population growth has a variety of effects on economic growth. On the one hand, more rapid population growth may lower productivity by stretching the supply of natural resources and byreducing the amount of capital available for each worker. On the other hand, a larger population may enhance the rate of technological progress because there are more scientists and engineers.CHAPTER OUTLINE:I. Economic Growth around the WorldA. Table 1 shows data on real GDP per person for 13 countries during different periods of time.1. The data reveal the fact that living standards vary a great deal between these countries.2. Growth rates are also reported in the table. Japan has had the largest growth rate over time,2.65% per year (on average).3. Because of different growth rates, the ranking of countries by income per person changesover time.a. In the late 19th century, the United Kingdom was the richest country in the world.b. Today, income per person is lower in the United Kingdom than in the United States (aformer colony of the United Kingdom).Chapter 12/Production and Growth ❖211B. FYI: Are You Richer Than the Richest American?1. According to the magazine American Heritage, the richest American of all time is John B.Rockefeller, whose wealth today would be the equivalent of approximately $200 billion.2. Yet, because Rockefeller lived from 1839 to 1937, he did not get the chance to enjoy manyof the conveniences we take for granted today such as television, air conditioning, andmodern medicine.3. Thus, because of tech nological advances, the average American today may enjoy a “richer”life than the richest American who lived a century ago.C. FYI: A Picture Is Worth a Thousand Statistics1. This box presents three photos showing a typical family in three countries – the UnitedKingdom, Mexico, and Mali. Each family was photographed outside their home, together withall of their material possessions.2. These photos demonstrate the vast difference in the standards of living in these countries. II. Productivity: Its Role and DeterminantsA. Why Productivity Is So Important1. Example: Robinson Crusoea. Because he is stranded alone, he must catch his own fish, grow his own vegetables, andmake his own clothes.b. His standard of living depends on his ability to produce goods and services.2. Definition of productivity: the quantity of goods and services produced from eachunit of labor input.3. Review of Principle #8: A Country’s Standard of Living Depends on Its Ability to ProduceGoods and Services.B. How Productivity Is Determined1. Physical Capital per Workera. Definition of physical capital: the stock of equipment and structures used toproduce goods and services.b. Example: Crusoe will catch more fish if he has more fishing poles.2. Human Capital per Workera. Definition of human capital: the knowledge and skills that workers acquirethrough education, training, and experience.b. Example: Crusoe will catch more fish if he has been trained in the best fishing techniquesor as he gains experience fishing.212 ❖ Chapter 12/Production and Growth3. Natural Resources per Workera. Definition of natural resources: the inputs into production that are provided by nature, such as land, rivers, and mineral deposits .b. Example: Crusoe will have better luck catching fish if there is a plentiful supply around his island.4. Technological Knowledgea. Definition of technological knowledge : society’s understanding of the best ways to produce goods and services .b. Example: Crusoe will catch more fish if he has invented a better fishing lure.C. FYI: The Production Function1. A production function describes the relationship between the quantity of inputs used in production and the quantity of output from production.2. The production function generally is written like this:where Y = output, L = quantity of labor, K = quantity of physical capital, H = quantity of human capital, N = quantity of natural resources, A reflects the available production technology, and F () is a function that shows how inputs are combined to produce output.3. Many production functions have a property called constant returns to scale.a. This property implies that as all inputs are doubled, output will exactly double.b. This implies that the following must be true:where x= 2 if inputs are doubled.c. This also means that if we want to examine output per worker we could set x = 1/L and we would get the following:This shows that output per worker depends on the amount of physical capital per worker (K /L ), the amount of human capital per worker (H /L ), and the amount of naturalresources per worker (N /L ).4. Case Study: Are Natural Resources a Limit to Growth?a. This section points out that as the population has grown over time, we have discoveredways to lower our use of natural resources. Thus, most economists are not worried about shortages of natural resources.Chapter 12/Production and Growth ❖ 213III. Economic Growth and Public PolicyA. Saving and Investment1. Because capital is a produced factor of production, a society can change the amount of capital that it has.2. However, there is an opportunity cost of doing so; if resources are used to produce capital goods, fewer goods and services are produced for current consumption.B. Diminishing Returns and the Catch-Up Effect1. Definition of diminishing returns: the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases .a. As the capital stock rises, the extra output produced from an additional unit of capital willfall.b. This can be seen in Figure 1, which shows how the amount of capital per worker determines the amount of output per worker, holding constant all other determinants ofoutput.c. Thus, if workers already have a large amount of capital to work with, giving them anadditional unit of capital will not increase their productivity by much.d. In the long run, a higher saving rate leads to a higher level of productivity and income, but not to higher growth rates in these variables.2. An important implication of diminishing returns is the catch-up effect.a. Definition of catch-up effect: the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich .b. When workers have very little capital to begin with, an additional unit of capital will increase their productivity by a great deal.C. Investment from Abroad1. Saving by domestic residents is not the only way for a country to invest in new capital.2. Investment in the country by foreigners can also occur.a. Foreign direct investment occurs when a capital investment is owned and operated by a foreign entity.214 ❖Chapter 12/Production and Growthb. Foreign portfolio investment occurs when a capital investment is financed with foreignmoney but operated by domestic residents.3. Some of the benefits of foreign investment flow back to foreign owners. But the economy stillexperiences an increase in the capital stock, which leads to higher productivity and higherwages.4. The World Bank is an organization that tries to encourage the flow of investment to poorcountries.a. The World Bank obtains funds from developed countries such as the United States andmakes loans to less-developed countries so that they can invest in roads, sewer systems,schools, and other types of capital.b. The World Bank also offers these countries advice on how best to use these funds.D. Education1. Investment in human capital also has an opportunity cost.a. When students are in class, they cannot be producing goods and services forconsumption.b. In less-developed countries, this opportunity cost is considered to be high; as a result,children often drop out of school at a young age.2. Because there are positive externalities in education, the effect of lower education on theeconomic growth rate of a country can be large.3. Many poor count ries also face a “brain drain”—the best educated often leave to go to othercountries where they can enjoy a higher standard of living.E. Health and Nutrition1. Human capital can also be used to describe another type of investment in people:expenditures that lead to a healthier population.2. Other things being equal, healthier workers are more productive.3. Making the right investments in the health of the population is one way for a nation toincrease productivity.F. Property Rights and Political Stability1. Protection of property rights and promotion of political stability are two other important waysthat policymakers can improve economic growth.2. There is little incentive to produce products if there is no guarantee that they cannot betaken. Contracts must also be enforced.3. Countries with questionable enforcement of property rights or an unstable political climatewill also have difficulty in attracting foreign (or even domestic) investment.Chapter 12/Production and Growth ❖2154. In the News: Does Food Aid Help or Hurt?a. Economic policies designed to improve productivity sometimes have adverse unintendedeffects.b. This article from The Wall Street Journal, Real Time Economics blog discusses economicresearch on the effects of food aid to poor countries on armed conflict in a recipientcountry.G. Free Trade1. Some countries have tried to achieve faster economic growth by avoiding transacting withthe rest of the world.2. However, trade allows a country to specialize in what it does best and thus consume beyondits production possibilities.3. When a country trades wheat for steel, it is as well off as it would be if it had developed anew technology for turning wheat into steel.4. The amount a nation trades is determined not only by government policy but also bygeography.a. Countries with good, natural seaports find trade easier than countries without thisresource.b. Countries with more than 80 percent of their population living within 100 kilometers of acoast have an average GDP per person that is four times as large as countries with lessthan 20 percent of their population living near a coast.H. Research and Development1. The primary reason why living standards have improved over time has been due to largeincreases in technological knowledge.2. Knowledge can be considered a public good.3. The U.S. government promotes the creation of new technological information by providingresearch grants and providing tax incentives for firms engaged in research.4. The patent system also encourages research by granting an inventor the exclusive right toproduce the product for a specified number of years.I. Population Growth1. Stretching Natural Resourcesa. Thomas Malthus (an English minister and early economic thinker) argued that an ever-increasing population meant that the world was doomed to live in poverty forever.b. However, he failed to understand that new ideas would be developed to increase theproduction of food and other goods, including pesticides, fertilizers, mechanizedequipment, and new crop varieties.216 ❖Chapter 12/Production and Growth2. Diluting the Capital Stocka. High population growth reduces GDP per worker because rapid growth in the number ofworkers forces the capital stock to be spread more thinly.b. Countries with a high population growth have large numbers of school-age children,placing a burden on the education system.3. Some countries have already instituted measures to reduce population growth rates.4. Policies that foster equal treatment for women should raise economic opportunities forwomen leading to lower rates of population.5. Promoting Technological Progressa. Some economists have suggested that population growth has driven technologicalprogress and economic prosperity.b. In a 1993 journal article, economist Michael Kremer provided evidence that increases inpopulation lead to technological progress.J. In the News: One Economist’s Answer1. Why do some nations thrive while others do not?2. This article by economist Daron Acemoglu provides his ideas on the answers to this question. SOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. The approximate growth rate of real GDP per person in the United States is 1.77 percent(based on Table 1) from 1870 to 2010. Countries that have had faster growth include Japan,Brazil, Mexico, China, Germany, and Canada; countries that have had slower growth includeArgentina, India, United Kingdom, Indonesia, Pakistan, and Bangladesh.2. The four determinants of a country’s productivity are: (1) physical capital, which is the stockof equipment and structures that are used to produce goods and services; (2) human capital,which is the knowledge and skills that workers acquire through education, training, andexperience; (3) natural resources, which are inputs into production that are provided bynature, such as land, rivers, and mineral deposits; and (4) technological knowledge, which issociety’s understanding of the best ways to produce goods and services.3. Ways in which a government policymaker can try to raise the growth in living standards in asociety include: (1) investing more current resources in the production of capital, which hasChapter 12/Production and Growth ❖217 the drawback of reducing the resources used for producing current consumption; (2)encouraging investment from abroad, which has the drawback that some of the benefits ofinvestment flow to foreigners; (3) increasing education, which has an opportunity cost in thatstudents are not engaged in current production; (4) protecting property rights and promotingpolitical stability, which has the drawback of enforcement costs; (5) pursuing outward-oriented policies to encourage free trade, which may have the drawback of making a countrymore dependent on its trading partners; (6) reducing the rate of population growth, whichmay have the drawbacks of reducing individual freedom and lowering the rate oftechnological progress; and (7) encouraging research and development, which (likeinvestment) may have the drawback of reducing current consumption.Questions for Review1. The level of a nation’s GDP measure s both the total income earned in the economy and thetotal expenditure on the economy’s output of goods and services. The level of real GDP is agood gauge of economic prosperity, and the growth rate of real GDP is a good gauge ofeconomic progress. You would rather live in a nation with a high level of GDP, even though ithad a low growth rate, than in a nation with a low level of GDP and a high growth rate,because the level of GDP is a measure of prosperity.2. The four determinants of productivity are: (1) physical capital, which is the stock ofequipment and structures that are used to produce goods and services; (2) human capital,which consists of the knowledge and skills that workers acquire through education, training,and experience; (3) natural resources, which are inputs into production that are provided bynature; and (4) technological knowledge, which is society’s understanding of the best waysto produce goods and services.3. A college degree is a form of human capital. The skills learned in earning a college degreeincrease a worker's productivity.4. Higher saving means fewer resources are devoted to consumption and more to producingcapital goods. The rise in the capital stock leads to rising productivity and more rapid growthin GDP for a while. In the long run, the higher saving rate leads to a higher standard of living.A policymaker might be deterred from trying to raise the rate of saving because doing sorequires that people reduce their consumption today and it can take a long time to get to ahigher standard of living.5. A higher rate of saving leads to a higher growth rate temporarily, not permanently. In theshort run, increased saving leads to a larger capital stock and faster growth. But as growthcontinues, diminishing returns to capital mean growth slows down and eventually settlesdown to its initial rate, though this may take several decades.6. Removing a trade restriction, such as a tariff, would lead to more rapid economic growthbecause the removal of the trade restriction acts like an improvement in technology. Freetrade allows all countries to consume more goods and services.7. The higher the rate of population growth, the lower is the level of GDP per person becausethere's less capital per person, hence lower productivity.8. The U.S. government tries to encourage advances in technological knowledge by providingresearch grants through the National Science Foundation and the National Institute of Health,218 ❖Chapter 12/Production and Growthwith tax breaks for firms engaging in research and development, and through the patentsystem.Quick Check Multiple Choice1. b2. c3. d4. c5. c6. aProblems and Applications1. The facts that countries import many goods and services yet must produce a large quantityof goods and services themselves to enjoy a high standard of living are reconciled by notingthat there are substantial gains from trade. To be able to afford to purchase goods fromother countries, an economy must generate income. By producing many goods and services,then trading them for goods and services produced in other countries, a nation maximizes itsstandard of living.2. a. More investment would lead to faster economic growth in the short run.b. The change would benefit many people in society who would have higher incomes as theresult of faster economic growth. However, there might be a transition period in whichworkers and owners in consumption-good industries would get lower incomes, andworkers and owners in investment-good industries would get higher incomes. In addition,some group would have to reduce their spending for some time so that investment couldrise.3. a. Private consumption spending includes buying food and buying clothes; privateinvestment spending includes people buying houses and firms buying computers. Manyother examples are possible. Education can be considered as both consumption andinvestment.b. Government consumption spending includes paying workers to administer governmentprograms; government investment spending includes buying military equipment andbuilding roads. Many other examples are possible.4. The opportunity cost of investing in capital is the loss of consumption that results fromredirecting resources toward investment. Over-investment in capital is possible because ofdiminishing marginal returns. A country can "over-invest" in capital if people would prefer tohave higher consumption spending and less future growth. The opportunity cost of investingin human capital is also the loss of consumption that is needed to provide the resources forinvestment. A country could "over-invest" in human capital if people were too highlyeducated for the jobs they could get for example, if the best job a Ph.D. in philosophy couldfind is managing a restaurant.5. a. The United States benefited from the Chinese and Japanese investment because it madeour capital stock larger, increasing our economic growth.Chapter 12/Production and Growth ❖ 219© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.b. It would have been better for Americans to make the investments because then they would have received all of the returns on the investments, instead of the returns going toChina and Japan.6. Greater educational opportunities for women could lead to faster economic growth in thesedeveloping countries because increased human capital would increase productivity and there would be external effects from greater knowledge in the country. Second, increasededucational opportunities for young women may lower the population growth rate because such opportunities raise the opportunity cost of having a child.7. a. Individuals with higher incomes have better access to clean water, medical care, and good nutrition.b. Healthier individuals are likely to be more productive.c. Understanding the direction of causation will help policymakers place proper emphasis on the programs that will achieve both greater health and higher incomes. 8. Peace would promote economic growth because it is an indication that property rights will berespected in the future. Armed conflict and the threat of a revolutionary government reduce domestic residents' incentive to save, invest, and start new businesses. Moreover, foreigners have less incentive to invest in the country.Easy taxes would promote economic growth because they result in citizens and businesses retaining a greater share of the income they earn and, thus, being able to save and invest a greater portion of that income.A tolerable administration of justice would promote economic growth because it would ensure the maintenance of property rights, which encourages domestic saving andinvestment from abroad.。
第9篇长期中的真实经济第25章生产与增长25.1 复习笔记跨考网独家整理最全经济学考研真题，经济学考研课后习题解析资料库，您可以在这里查阅历年经济学考研真题，经济学考研课后习题，经济学考研参考书等内容，更有跨考考研历年辅导的经济学学哥学姐的经济学考研经验，从前辈中获得的经验对初学者来说是宝贵的财富，这或许能帮你少走弯路，躲开一些陷阱。
以下内容为跨考网独家整理，如您还需更多考研资料，可选择经济学一对一在线咨询进行咨询。
1．生产率（1）定义生产率指用以衡量每单位投入要素的产出量的指标。
如一个工人单位小时工作所生产的物品与劳务的数量。
（2）生产率的决定因素①人均物质资本。
物质资本是指用于生产物品与劳务的设备与建筑物存量。
②人均人力资本。
人力资本是指通过对人的教育、培训、实践经验、迁移、保健等方面的投资而获得的知识和技能的积累。
③人均自然资源。
自然资源是指自然界提供的生产投入，如土地、河流和矿藏。
自然资源有两种形式：可再生的与不可再生的。
④技术知识。
技术知识指的是自适应的、可在公众间传递的信息与技巧。
2．经济增长和公共政策（1）经济增长的含义和源泉在宏观经济学中，经济增长通常被定义为产量的增加。
具体理解有两层含义：①经济增长指一个经济体所生产的物质产品和劳务在一个相当长时期内的持续增长，即经济总产量的增长；②经济增长是按人口平均计算的实际产出的持续增长，即人均产量的增长。
经济增长的源泉最主要的因素是：劳动数量增加和质量提高（即人力资本的增长）、资本存量的增加和技术进步（是广义概念，包括采用新技术、新产品、先进管理手段以及资源配置的高效率等）。
（2）储蓄和投资①储蓄是指个人可支配收入中用于消费支出后所剩余的部分。
储蓄是西方宏观经济学中的一个重要概念，也是凯恩斯收入与就业理论的重要概念之一。
但是，储蓄是一个不容易确定的概念，无论从它的来源还是作用方面看，均没有准确的数量限制。
储蓄可能是正数，也可能是负数。
当可支配收入大于最终的消费支出时，储蓄值为正数；反之，则为负数。
Chapter Production and Growth25Economic Growth Around the World •Real GDP per person–Living standard–Vary widely from country to country •Growth rate–How rapidly real GDP per person grew in thetypical year•Because of differences in growth rates–Ranking of countries by income changessubstantially over time2TableThe variety of growth experiences1Country Period Real GDP per personat beginning of period Real GDP per personat end of periodGrowth rate(per year)Japan Brazil China Mexico Germany 1890–20061900–20061900–20061900–20061870–2006$1,4087296701,0852,045$33,1508,8807,74011,41031,8302.76%2.392.342.242.043yCanada Argentina United States IndiaUnited Kingdom Indonesia Bangladesh Pakistan 1870–20061900–20061870–20061900–20061870–20061900–20061900–20061900–20062,2242,1473,7526324,50283458369034,61015,39044,2603,80035,5803,9502,3402,5002.041.881.831.711.531.481.321.22Productivity: its Role and Determinants•Productivity–Quantity of goods and services–Produced from each unit of labor input •Why productivity is so important–Key determinant of living standards–An economy’s income is the economy’soutput4Productivity: its Role and Determinants•How productivity is determined–Physical capital•Stock of equipment and structures•Used to produce goods and services–Human capitalH it l•Knowledge and skills that workers acquirethrough education, training, and experience5Productivity: its Role and Determinants •How productivity is determined–Natural resources•Inputs into the production of goods and services•Provided by nature, such as land, rivers, andmineraldeposits–Technological knowledge•Society’s understanding of the best ways toproduce goods and services6•Population growth & Standard of living growth –is it sustainable?•Argument–Natural resources ‐will eventually limit how much world’s economies Are natural resources a limit togrowth?the world s can grow–Technological progress ‐often yields ways to avoid these limits–Improved use of natural resources–Recycling7•Are these efforts enough to permit continued economic growth?•Prices of natural resources–Scarcity ‐reflected in market pricesN t l iAre natural resources a limit togrowth?–Natural resource prices •Substantial short ‐run fluctuations•Stable or falling ‐over long spans of time–Our ability to conserve these resources•Growing more rapidly than their supplies are dwindling •Market prices ‐no reason to believe that natural resources are a limit to economic growth 8Economic Growth and Public Policy •Saving and investment•Raise future productivity–Invest more current resources in the production of capital–Trade ‐off•Devote fewer resources to produce goods and services for current consumption9Economic Growth and Public Policy •Diminishing returns and the catch ‐up effect •Higher savings rate–Fewer resources –used to make consumption goods–More resources ‐to make capital goods –Capital stock increases–Rising productivity–More rapid growth in GDP10Economic Growth and Public Policy •Diminishing returns and the catch ‐up effect •Diminishing returns–Benefit from an extra unit of an input –Declines as the quantity of the input increases•In the long run; higher savings rate –Higher level of productivity–Higher level of income–Not higher growth in productivity or income11Figure Outputper WorkerIllustrating the production function11 2. When the economy has ahigh level of capital, anextra unit of capital leads toa small increase in output.12Output per WorkerThis figure shows how the amount of capital per worker influences the amount of output per worker. Other determinants of output, including human capital, natural resources, and technology, are held constant. The curve becomes flatter as the amount of capital increases because of diminishing returns to capital 11. When the economy has a low level of capital, anextra unit of capital leads to a large increase in output.Economic Growth and Public Policy•Diminishing returns and the catch‐up effect •Catch‐up effect–Countries that start off poor–Tend to grow more rapidly than countries that start off rich•Poor countries–Low productivity–Even small amounts of capital investment •Increase workers’ productivity substantially13Economic Growth and Public Policy•Diminishing returns and the catch‐up effect •Rich countries–High productivity–Additional capital investment•Small effect on productivity•Poor countries–Tend to grow faster than rich countries14Economic Growth and Public Policy•Investment from abroad–Another way for a country to invest in newcapital–Foreign direct investment•Capital investment that is owned and operated byC it l i t t th t i d d t d ba foreign entity–Foreign portfolio investment•Investment financed with foreign money butoperated by domestic residents15Economic Growth and Public Policy•Education–Investment in human capital–Gap between wages of educated anduneducated workers–Opportunity cost: wages forgonei f–Conveys positive externality•Problem for poor countries–Brain drain16Economic Growth and Public Policy •Health and nutrition–Healthier workers –more productive–The right investments in the health of thepopulation•One way for a nation to increase productivity andO f ti t i d ti it draise living standards–Historical trends: long‐run economic growth •Improved health ‐from better nutrition•Taller workers –higher wages –betterproductivity17Economic Growth and Public Policy •Health and nutrition–Vicious circle in poor countries•Are poor–Because populations are not healthy•Populations are nothealthy–Because they are poor»Cannot afford better healthcare and nutrition18Economic Growth and Public Policy•Property rights and political stability •Foster economic growth–Protect property rights•Ability of people to exercise authority over theresources they ownth•Courts –enforce property rights–Promote political stability19Economic Growth and Public Policy •Free trade•Poorest countries–Inward‐oriented policies•Avoid interaction with the rest of the world •Outward‐oriented policies–Integrate into the world economy •International trade in goods and services –Can improve economic well‐being20Economic Growth and Public Policy •Research and development•Knowledge –public good–Farming methods–Aerospace research•Air Force; NASA–Research grants•National Science Foundation•National Institutes of Health–Tax breaks–Patent system21Economic Growth and Public Policy•Population growth•Large population–Large labor force–More consumers•Stretching natural resources?•Diluting the capital stock–High population growth•Reduces GDP per worker–Promoting technological progress22。
a. Thomas Malthus (an English minister and early economic thinker) argued that an ever-increasing population meant that the world was doomed to live in poverty forever.b. However, he failed to understand that new ideas would be developed to increase theproduction of food and other goods, including pesticides, fertilizers, mechanizedequipment, and new crop varieties.c. In the News: Escape from Malthus –This is an article from the New York Times describingthe impact the Industrial Revolution had on England’s economy.2. Diluting the Capital Stocka. High population growth reduces GDP per worker because rapid growth in the number ofworkers forces the capital stock to be spread more thinly.b. Countries with a high population growth have large numbers of school-age children,placing a burden on the education system.3. Some countries have already instituted measures to reduce population growth rates.4. Policies that foster equal treatment for women should raise economic opportunities forwomen leading to lower rates of population.5. Promoting Technological Progressa. Some economists have suggested that population growth has driven technologicalprogress and economic prosperity.b. In a 1993 journal article, economist Michael Kremer provided evidence that increases inpopulation lead to technological progress.SOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. The approximate growth rate of real GDP per person in the United States is 1.83 percent(based on Table 1) from 1870 to 2006. Countries that have had faster growth include Japan,Brazil, Mexico, China, Germany, Canada, and Argentina; countries that have had slowergrowth include India, United Kingdom, Indonesia, Pakistan, and Bangladesh.2. The four determinants of a country’s productivity are: (1) physical capital, which is the stockof equipment and structures that are used to produce goods and services; (2) human capital,which is the knowledge and skills that workers acquire through education, training, andexperience; (3) natural resources, which are inputs into production that are provided bynature, such as land, rivers, and mineral deposits; and (4) technological knowledge, which issociety’s understanding of the best ways to produce goods and services.3. Ways in which a government policymaker can try to raise the growth in living standards in asociety include: (1) investing more current resources in the production of capital, which hasthe drawback of reducing the resources used for producing current consumption; (2)encouraging investment from abroad, which has the drawback that some of the benefits ofinvestment flow to foreigners; (3) increasing education, which has an opportunity cost in thatstudents are not engaged in current production; (4) protecting property rights and promotingpolitical stability, for which no drawbacks are obvious; (5) pursuing outward-oriented policiesto encourage free trade, which may have the drawback of making a country more dependenton its trading partners; (6) reducing the rate of population growth, which may have thedrawbacks of reducing individual freedom and lowering the rate of technological progress;and (7) encouraging research and development, which (like investment) may have thedrawback of reducing current consumption.Questions for Review1. The level of a nation’s GDP measures both the total income earned in the economy and thetotal expenditure on the economy’s output of goods and services. The level of real GDP is agood gauge of economic prosperity, and the growth of real GDP is a good gauge of economicprogress. You would rather live in a nation with a high level of GDP, even though it had a lowgrowth rate, than in a nation with a low level of GDP and a high growth rate, because thelevel of GDP is a measure of prosperity.2. The four determinants of productivity are: (1) physical capital, which is the stock ofequipment and structures that are used to produce goods and services; (2) human capital,which consists of the knowledge and skills that workers acquire through education, training,and experience; (3) natural resources, which are inputs into production that are provided bynature; and (4) technological knowledge, which is society’s understanding of the best waysto produce goods and services.3. A college degree is a form of human capital. The skills learned in earning a college degreeincrease a worker's productivity.4. Higher saving means fewer resources are devoted to consumption and more to producingcapital goods. The rise in the capital stock leads to rising productivity and more rapid growthin GDP for a while. In the long run, the higher saving rate leads to a higher standard ofliving. A policymaker might be deterred from trying to raise the rate of saving because doingso requires that people reduce their consumption today and it can take a long time to get toa higher standard of living.5. A higher rate of saving leads to a higher growth rate temporarily, not permanently. In theshort run, increased saving leads to a larger capital stock and faster growth. But as growthcontinues, diminishing returns to capital mean growth slows down and eventually settlesdown to its initial rate, though this may take several decades.6. Removing a trade restriction, such as a tariff, would lead to more rapid economic growthbecause the removal of the trade restriction acts like an improvement in technology. Freetrade allows all countries to consume more goods and services.7. The higher the rate of population growth, the lower is the level of GDP per person becausethere's less capital per person, hence lower productivity.8. The U.S. government tries to encourage advances in technological knowledge by providingresearch grants through the National Science Foundation and the National Institute of Health,with tax breaks for firms engaging in research and development, and through the patentsystem.Problems and Applications1. a. More investment would lead to faster economic growth in the short run.b. The change would benefit many people in society who would have higher incomes as theresult of faster economic growth. However, there might be a transition period in whichworkers and owners in consumption-good industries would get lower incomes, andworkers and owners in investment-good industries would get higher incomes. Inaddition, some group would have to reduce their spending for some time so thatinvestment could rise.2. a. Private consumption spending includes buying food and buying clothes; privateinvestment spending includes people buying houses and firms buying computers. Manyother examples are possible. Education can be considered as both consumption andinvestment.b. Government consumption spending includes paying workers to administer governmentprograms; government investment spending includes buying military equipment andbuilding roads. Many other examples are possible. Government spending on healthprograms is an investment in human capital. This is truer for spending on healthprograms for the young rather than those for the elderly.3. The facts that countries import many goods and services yet must produce a large quantityof goods and services themselves to enjoy a high standard of living are reconciled by notingthat there are substantial gains from trade. In order to be able to afford to purchase goodsfrom other countries, an economy must generate income. By producing many goods andservices, then trading them for goods and services produced in other countries, a nationmaximizes its standard of living.4. The opportunity cost of investing in capital is the loss of consumption that results fromredirecting resources toward investment. Over-investment in capital is possible because ofdiminishing marginal returns. A country can "over-invest" in capital if people would prefer tohave higher consumption spending and less future growth. The opportunity cost of investingin human capital is also the loss of consumption that is needed to provide the resources forinvestment. A country could "over-invest" in human capital if people were too highlyeducated for the jobs they could get⎯for example, if the best job a Ph.D. in philosophy couldfind is managing a restaurant.5. a. When a German firm opens a factory in South Carolina, it represents foreign directinvestment.b. The investment increases U.S. GDP because it increases production in the United States.The effect on U.S. GNP would be smaller because the owners would get paid a return on their investment that would be part of German GNP rather than U.S. GNP.6. a. The United States benefited from the Chinese and Japanese investment because it madeour capital stock larger, increasing our economic growth.b. It would have been better for the United States to make the investments itself becausethen it would have received the returns on the investment itself, instead of the returnsgoing to China and Japan.7. Greater educational opportunities for women could lead to faster economic growth in thesedeveloping countries because increased human capital would increase productivity and there would be external effects from greater knowledge in the country. Second, increasededucational opportunities for young women may lower the population growth rate because such opportunities raise the opportunity cost of having a child.8. a. Individuals with higher incomes have better access to clean water, medical care, andgood nutrition.b. Healthier individuals are likely to be more productive.c. Understanding the direction of causation will help policymakers place proper emphasis onthe programs that will achieve both greater health and higher incomes.9. a. Political stability could lead to strong economic growth by making the country attractiveto investors. The increased investment would raise economic growth.b. Strong economic growth could lead to political stability because when people have highincomes they tend to be satisfied with the political system and are less likely tooverthrow or change the government.10. a. If output is rising and the number of workers is declining, then output per worker mustbe rising.b. Policymakers should not be concerned as long as output in the manufacturing sector isnot declining. The reduction in manufacturing jobs will allow labor resources to move toother industries, increasing total output in the economy. An increase in productivity ofworkers (as measured by output per worker) is beneficial to the economy.。
