the average quantity of output produced per unit of labor
productivity
Equals real GDP - quantity of output produced (variable)
Y
Equals quantity of Labor (variable)
L
Two Reasons why productivity is Important
- When a nation’s workers are very productive real GDP is large and incomes are high
- When productivity grows rapidly, so do living standards
the stock of equipment and structures used to produce goods and services is called
physical capital
K/L symbolizes
Physical capital per worker
and increase in K/L leads to an increase in __
Y/L or productivity
the knowledge and skills workers acquire through education training and experience
human capital
H/L represents
average workers human capital
An increase in H/L leads to an increase in ___
Y/L or productivity
the inputs into production that nature provides, land, minerals, etc.
Natural resources
an increase in N/L leads to an increase in ___
Y/L or Productivity
society’s understanding of the best ways to produce goods and services
Technological Knowledge
What does Technological Knowledge mean
that any advance in Knowledge leads to an advance in technology
What is the difference in Technological Knowledge and Human Capital
Technological knowledge refers to society’s understanding of how to produce goods and services and human capital is the effort put into acquiring this knowlege
What is the production funtction
Y = A x f( L,K,H,N )
what is the diminishing returns concept
that you will get less and less back the more capital you invest
what is the catch-up effect
where a country with a lower standard of living can increase it dramatically by adding capital to their economy
capital investment that is owned and operated by a foreign entity
foreign direct investment
a capital investment dinanced with foreign money but operated by domestic residents
foreign portfolio investment
how can foreign investment help a country
it can help them get better technology, especially when a poor country can’t raise the money
How can education help a country
it increases human capital because people can handle newer technologies and raises worker’s wages
How can health and nutrition help a country
healthier workers are more productive leading to increases in H
the ability of people to excercise authority over the resources they own
property right
