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11 Cards in this Set

  • Front
  • Back
Physical Capital
The stock of equipment and structures that are used to produce goods and services

Capital is a factor of produciton used to produce all kinds of goods and services, including more capital
Human Capital
The knowledge and skills that workers acquire through education training, and experience
Natural resources
the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits
Technological knowledge
society's understanding of the best ways to produce goods and services

Can be Proprietary or Common Knowledge
Traditional view of the produciton process is that capital is subject to diminishing returns
The property whereby the benefit from an extra unit of input declines as the quantity of the input increases

pg. 561
In the long run the higher saving rate leads to a higher level of productivity and income but not to higher growth in these variables
The Catch up effect
The property whereby countries that start off poor tend to grow more rapidly than countries that start off rich
Foreign Direct Investment
A capital investment that is owned and operated by a foreign entity

(America building a factory in mexico)
Foreign Portfolio Investment
An invetstment that is financed with foreign money but operated by domestic residents

(America investing in a mexican company)
Factors that Affect Productivity
Savings & Investment

Investment from Abroad


Health & Nutrition

Property Rights & Political Stability

Free Trade


Population Growth
Productivity depends on:
physical capital, human capital, natural resources, technological knowledge available to workers