Economy help

Guided Practice for Chapter 6: Production and Growth

 

Resources for reading and viewing

Textbook, Chapter 6

Videos on Sapling

 

Practice exercises

1. List the five factors of growth in the production function (the first equation in the purple box on page 139, or the FYI box entitled "The Production Function" towards the end of section 7-2b) and give one example illustrating an increase in each factor.

2. Briefly explain in your own words the law of diminishing returns.

3. Suppose Country A currently has a per-capita GDP of $2000, and Country B has a per-capita GDP of $1000.  The per-capita GDP of Country A is growing at a rate of 5%, while the per-capita GDP of Country B is growing at 10% per year.  Currently, the ratio of the per-capita GDP of Country A to that of Country B is $2000/$1000 = 2.  What is this ratio after 1 year?  After 2 years?  After 3 years?  How does this illustrate the catch-up effect?

4. Pick two items from pages 143 or later (sections 7-3c through 7-3i) and (briefly—one or two sentences) explain in your own words why that item would tend to increase per-capita GDP.