85. The traditional view of the production process is that capital is subject to

86. If there are diminishing returns to capital,

87. In the long run, a higher saving rate

88. If a country were to increase its saving rate, in the long run it would also increase its

89. If a country’s saving rate increases, in the long run

90. If a country’s saving rate increases, in the long run

91. Suppose Mexico increases its saving rate. In the long run

92. Suppose that Poland undertakes policy to increase its saving rate. This policy will likely

93. Other things equal, relatively poor countries tend to grow

94. Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one has less capital and so less real GDP per person than the other. Finally, suppose that the saving rate in both countries increases from 5 percent to 6 percent. Over the next ten years we would expect that

95. Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one has less capital and so less real GDP per person. Suppose that both increase their saving rate from 3 percent to 4 percent. In the long run

96. Real GDP per person is $21,000 in Aquilonia, $15,000 in Nemedia and $6,000 in Shem. Saving per person is $2,000 in all three countries. Other things equal, we would expect that

97. Other things the same, if a country increased its saving rate, in 40 years they would likely have

98. The catch-up effect refers to the idea that

99. The logic behind the catch-up effect is that

101. Which of the following is consistent with the catch-up effect?

103. if your American-based firm opens and operates a new watch factory in Panama, your firm is engaging in

104. In the 1800s, Europeans purchased stock in American companies who used the funds to build railroads and factories. The Europeans made

105. Foreign saving is used for domestic investment when foreigners engage in

106. Suppose U.S.-based Intel builds and operates a new chip factory in Mexico. Future production from such an investment would

107. Suppose Japanese-based Sony Corporation builds and operates a new chip factory in the United States. Future production from such an investment would

108. The opening of a new American-owned factory in Egypt would tend to increase Egypt’s GDP more than it increases Egypt’s GNP because

109. Investment from abroad

110. An organization that tries to encourage the flflow of investment to poor countries is the

112. Which of the following is generally an opportunity cost of investment in human capital?

113. Educated people may generate ideas that increase production. These ideas

114. Which of the following is an example of the “brain drain”?

117. Property rights refer to

1. The average person in a rich country, such as Germany, has income about ten times that of an average person in a poor country such as NigeriA.

2. Both the standard of living and the growth of real GDP per person vary widely across countries.

3. If they could increase their growth rates slightly, countries with low income would catch up with rich countries in about ten years.

5. Although growth rates across countries vary, rankings of country by income remain pretty much the same over time.

6. International data on the history of real GDP growth rates shows that the rich countries get richer and the poor countries get poorer.

7. Productivity can be found as number of hours worked divided by output.

8. Indonesians have a lower standard of living than Americans because they have a lower level of productivity.

9. A forest is an example of a nonrenewable resource.

10. Changes in the prices of most natural resources compared to other goods indicate that natural resources are generally becoming scarcer.

11. A country without a lot of domestic natural resources can have a high standard of living.

12. Constant returns to scale is the point on a production function where increasing inputs will no longer increase output.

13. An increase in the saving rate does not permanently increases the growth rate of real GDP per person.

14. Other things the same, countries with low income are likely to increase their income more by adding another unit of capital than are countries that have high income.

15. Over about the past thirty years the ratio of investment to GDP in Korea was higher than in the United States and so Korea had substantially higher growth.

16. In ten years when you are the owner of a major U.S. corporation, if your corporation opens and operates a branch in a foreign country you will be engaging in foreign direct investment.

17. Investment in both human and physical capital have opportunity costs.

18. Gary Becker proposes compulsory school attendance as an effective way to reduce child labor.

19. A country that made their courts less corrupt and their government more stable would likely see their standard of living rise.

20. An increase in government expenditures for almost any purpose is likely to raise a country’s standard of living in the long run.

21. Economists generally believe that outward oriented policies are more likely to foster growth than inward oriented policies.

22. One reason that governments may fifind it useful to sponsor universities and basic research is that to a large extent knowledge is a public gooD.

24. The productivity slowdown appears to be primarily the result of a decrease in the capital to labor ratio.

26. In countries where women are discriminated against, policies that increase their career and educational opportunities are likely to increase the birth rate.