Since the Industrial Revolution, economic growth has increased tremendously. Discuss some of the outcomes of that economic growth.
All U.S. states require children to attend school. Mandatory school attendance ends at ages 16–18, depending on the state. The adult literacy rate in North America was 100% in 2016. Discuss how compulsory education impacts labor productivity, the aggregate production function, and overall economic growth.
An example of U.K. foreign investment was a state-of-the-art manufacturing plant that was opened in Austin, TX, but owned by the U.K.-owned BAE Systems. Describe how this investment affects the three inputs into the aggregate production function and GDP growth.
Discuss an example of technological progress not mentioned in the chapter and how it impacted economic growth.
Your friend Owen is a bit of a pessimist. “The world already has 7 billion people,” he says. “The population is growing too fast. Soon, there will be a food shortage—especially for people in undeveloped countries. They are too far behind modern times.” Using what you’ve learned about economic growth, why might Owen be wrong?
One analyst predicts that self-driving cars will ultimately reduce the number of cars that are produced. She argues that because self-driving cars can drive other people rather than sitting in people’s driveways and garages, the United States will need to produce fewer cars. She argues that growth will slow because we are producing a decreasing number of cars each year. Do you agree? Why or why not?
In early 2019, The Economist reported that Venezuela’s GDP had fallen by 50% over just five years. During the same time period, charges of bribery and corruption were piling up upon members of the Venezuelan government, including president Nicolás Maduro, whose reelection that year was widely perceived as illegitimate. Using what you learned in the chapter, discuss how bribery and corruption in the Venezuelan government could lead to declines in GDP. What are some of the crucial elements that governments must provide to encourage innovation and growth?
You’ve started developing an app that examines students’ personalities and other characteristics, and sorts them into highly effective study groups. Using the cost-benefit principle, compare your incentives to innovate and develop the software if (1) anyone could just copy your code and sell it or (2) the government allowed you to patent your code. How do your marginal benefits differ with and without intellectual property laws?
For each of the following institutions, provide a real-world example and explain how it promotes economic growth.
Enforceable property rights
Predictable and stable government
Efficient regulation
Consider the history of the world from 1 million B.C. until now. Although limited data exists from early history, we still have some information about how people lived and how much they consumed.
Has the global rate of economic growth remained constant throughout history?
Which of the following time periods experienced the highest average annual growth rate?
For each of the following, identify which inputs into the production function changed and their effects on economic growth.
The government passes a new program that encourages more employers to provide on-the-job training.
Improvements to health care cause an increasing share of older people to work instead of retiring.
The federal government increases annual spending on national infrastructure.
A large baby boom occurred two decades ago.
The U.S. savings rate has fallen from an annual rate of around 13% in the mid-1970s to 6% at the end of 2018. What are the consequences of a declining savings rate for economic growth?
What can you tell about an aggregate production function if real GDP per worker increases by 10% in response to all of the inputs increasing by 10%? What would you expect to happen if you doubled all the inputs? Explain your answer.
In the movie Avengers: Infinity War, antagonist Thanos believes that he can limit suffering and starvation by erasing half the population from existence. You’ve just watched the film with your pessimistic pal Owen. “Thanos did the right thing,” Owen tells you, again claiming that humanity would be better off if the population were smaller. Use the aggregate production function presented in the chapter to show Owen how an economist would analyze Thanos’s decision.
Technological advancements in the restaurant industry are increasing the output that can be produced by chefs and their equipment. For example, Spyce is a restaurant that opened in 2018 with robotic chefs that allow each human worker to produce and serve more meals. How will this technological progress impact the U.S. economy? Use a graph of the production function to explain the impact and clearly label the effect.
In Uganda GDP per person is $1,280 per year, and in Japan it is $39,100. What do you think is likely to happen to each country’s GDP per person if they both increase their physical capital per person by 20%? Which country do you expect to have a larger relative change in its output per person? Explain your answer.
In the debate over the Tax Cuts and Job Act of 2018, Republicans argued that businesses needed an incentive to invest more in physical capital in order for the United States to see much faster economic growth. In a rich country like the United States, why is investing in physical capital both important and yet unlikely to lead to a large increase in economic growth?
The International Monetary Fund (IMF) publishes World Economic Outlook Updates biannually. According to the July 2018 Update, the expected annual growth rate of advanced countries was 2.2% for 2019. On the other hand, expected annual growth for developing countries was 5.1%. Explain why developing countries might be growing so much faster than developed countries.
For years, Invisalign faced no direct competitors and was an industry leader within its niche in the orthodontics appliances market, earning $231 million profit in 2017. Invisalign pioneered the creation of clear dental trays that straighten teeth without the use of metal braces. What type of government policy fostered Invisalign’s innovation and provided protection from competition? Why does the government provide protection to companies like Invisalign who can dominate a market? What do you expect to happen when the government protection expires?