Chapter 4. Economic Growth



  1. How did the Industrial Revolution increase the economic growth rate and income levels in the United States?
  2. How much should a nation be concerned if its rate of economic growth is just 2% slower than other nations?
  3. Over the past 50 years, many countries have experienced an annual growth rate in real GDP per capita greater than that of the United States. Some examples are China, Japan, South Korea, and Taiwan. Does that mean the United States is regressing relative to other countries? Does that mean these countries will eventually overtake the United States in terms of the growth rate of real GDP per capita? Explain.
  4. How is GDP per capita calculated differently from labor productivity?
  5. How do gains in labor productivity lead to gains in GDP per capita?
  6. What is an aggregate production function?
  7. What is capital deepening?
  8. What do economists mean when they refer to improvements in technology?
  9. Labor Productivity and Economic Growth outlined the logic of how increased productivity is associated with increased wages. Detail a situation where this is not the case and explain why it is not.
  10. Change in labor productivity is one of the most watched international statistics of growth. Visit the St. Louis Federal Reserve website and find the data section ( Find international comparisons of labor productivity, listed under the FRED Economic database (Growth Rate of Total Labor Productivity), and compare two countries in the recent past. State what you think the reasons for differences in labor productivity could be.
  11. Refer back to the Work It Out about Comparing the Economies of Two Countries and examine the data for the two countries you chose. How are they similar? How are they different?
  12. Education seems to be important for human capital deepening. As people become better educated and more knowledgeable, are there limits to how much additional benefit more education can provide? Why or why not?
  13. Describe some of the political and social tradeoffs that might occur when a less developed country adopts a strategy to promote labor force participation and economic growth via investment in girls’ education.
  14. For a high-income economy like the United States, what aggregate production function elements are most important in bringing about growth in GDP per capita? What about a middle-income country such as Brazil? What about a very low-income country such as Niger?
  15. List some arguments for and against the likelihood of convergence.
  16. As technological change makes us more sedentary and food costs increase, obesity is likely. What factors do you think may limit obesity?
  17. An economy starts off with a GDP per capita of $5,000. How large will the GDP per capita be if it grows at an annual rate of 2% for 20 years? 2% for 40 years? 4% for 40 years? 6% for 40 years?
  18. An economy starts off with a GDP per capita of 12,000 euros. How large will the GDP per capita be if it grows at an annual rate of 3% for 10 years? 3% for 30 years? 6% for 30 years?


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