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Chapter 18: Q. 1 - Critical Thinking Questions (page 409)

In terms of the basic arithmetic of economic growth, through what mechanism do improvements in labor and capital productivity help to boost the rate of growth of per capita real GDP?

Short Answer

Expert verified

Improvements in labor and capital productivity help to accelerate the rate of growth of per capita real GDP. Workers who are frequently interrupted at work benefit the most from telework.

Step by step solution

01

Step 1:Introduction to GDP growth

The monetary value of all finished goods and services produced in a country over a given time period is known as the gross domestic product (GDP).. GDP provides an economic snapshot of a country and is used to estimate the size and growth rate of an economy. GDP can be calculated using expenditures, production, or income in one of three ways.

02

The mechanism do improvements in labor and capital productivity 

Appropriate telework schedules boost labor productivity

Telework improves life satisfaction, which in turn improves productivity.

Telework, on the other hand, adds to the stress of juggling work and home responsibilities.

Telework is more efficient for workers who commute by train for an extended period of time.

Telework has a greater impact on workers who are frequently interrupted at work.

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Most popular questions from this chapter

In principle, how could a nation maintain a relatively high rate of economic growth even if it also has a relatively high rate of population growth?

For each of the following situations, explain which of the policy issues discussed in this chapter relates to the stance the institution has taken.

a. The World Bank offers to make a loan to a company in an impoverished nation at a lower interest rate than the company had been about to agree to pay to borrow the same amount from a group of private banks.

b. The World Bank makes a loan to a company in a developing nation that has not yet received formal approval to operate there, even though the government approval process typically takes 15months.

c. The IMF extends a loan to a developing nation's government, with no preconditions, to enable the government to make already overdue payments on a loan it had previously received from the World Bank.

The annual rate of growth of real GDP in a developing nation is 0.3percent. Initially, the country's population was stable from year to year. Recently, however, a significant increase in the nation's birthrate has raised the annual rate of population growth to 0.5percent.

a. What was the rate of growth of per capita real GDP before the increase in population growth?

b. If the rate of growth of real GDP remains unchanged, what is the new rate of growth of per capita real GDP following the increase in the birthrate?

During the past year, several large banks extended 200million in loans to the government and several firms in a developing nation. International investors also purchased 150million in bonds and 350million in stocks issued by domestic firms. Of the stocks that foreign investors purchased, 100million were shares that amounted to less than a 10percent interest in domestic firms. This was the first year this nation had ever permitted inflows of funds from abroad.

a. Based on the investment category definitions discussed in this chapter, what was the amount of portfolio investment in this nation during the past year?

b. What was the amount of foreign direct investment in this nation during the past year?

Consider the estimates that the World Bank has assembled for the following nations:

Rank the nations in order, starting with the one you would expect to have the highest rate of economic growth, other things being equal. Explain your reasoning.
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