Econ Study Guide

Econ Study Guide - Econ Study Guide Chapter 7 Productivity...

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Econ Study Guide Chapter 7 Productivity – the quantity of goods and services produced from each unit of labor input Productivity is determined by: Physical capital – the stock of equipment used to produce goods and services o Capital is a factor of production used to produce all kinds of goods and services that includes more capital Human Capital – the economist’s term for the knowledge and skills that workers acquire through education, training and experience. Also, healthier people work better Natural Resources – inputs into production that are provided by nature, such as land, rivers, and mineral deposits. o Two forms – renewable and nonrenewable Technological knowledge – the understanding of the best ways to produce goods and services Diminishing returns: as the stock of capital rises, the extra output produced from an additional unit of capital falls. So, when workers already have many resources, giving them even more will only increase productivity slightly Catch-up effect – poor countries will have a more dramatic increase in productivity if given the right capitals, therefore, poor countries tend to grow faster than rich countries Foreign direct investment – example: America builds cars in mexico Foreign portfolio investment – example: America gives money to mexico so that they can build a factory of their own. GDP – Gross Domestic Product : all products made inside the US GNP – Gross National Product: all products made by residents of US here or overseas Externalities – the effects of one person’s actions on bystanders Brain Drain- the emigration of many of the most highly educated workers to rich countries. See, having smart people around has an external effect on bystanders in a positive way. If you take smart people away from Africa then the ones left behind in Africa are the ones who lose. This is why the rich get richer and the poor get poorer
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Inward-oriented policies – the belief that if countries work domestically, they are better off then if they were to collaborate with other countries Economists believe that outward-oriented policies are better nowadays Chapter 8 Financial markets – the institutions through which a person who wants to save can directly supply funds to a person who wants to borrow The Bond Market o Bond – a certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond
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Econ Study Guide - Econ Study Guide Chapter 7 Productivity...

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