BU204_03_Johnson_Jennifer_Unit_5_Homework prof corrections...

Jennifer Johnson
Kaplan University
BU204- 03
Macroeconomics
Anthony Brogna
Unit 5
November 16, 2010

Key Terms – Definitions
GDP per Capita:
“measures the total value of an economy’s production of final goods and services as well
as the income earned in that economy in a given year. ” (Krugman & Wells, 2009, p. 266).
To me this means the approximation of the value of goods produced per person in the country,
equal to the country's GDP divided by the total number of people in the country. Real GDP per
capita is the measure of the standard of living, the effect of changes in population.
Read more: http://www.investorwords.com/6827/GDP_per_capita.html#ixzz15V8V6Dvt
Labor productivity :
“refer either to output per worker or, in some cases, to output per hour” (Krugman &
Wells, 2009, p. 230).
To me Labor production is simply how much work someone can do within a given amount of
time. For example, you might measure the amount of phone calls a worker can take or widgets
they can put together. Labor productivity means the quantity of output divided by the
labor hours worked. Human capital or education can increase labor productivity and
having more capital can also increase productivity.

Diminishing returns to Physical Capital :
“holding the amount of human capital per worker and the state of technology fixed, each
successive increase in the amount of physical capital per worker leads to a smaller increase in
productivity.” (Krugman & Wells, 2009, p. 232).
My understanding of Diminishing returns to Physical Capital is described as how
the marginal production of a factor of production starts to progressively decrease as the factor is
increased, in contrast to the increase that would otherwise be normally expected. Example of