Productivity, Growth, and Policy Lecture Review

Flashcards covering key concepts from the lecture on productivity, growth, and policy, including types of capital, technology, living standards, and interest calculations.

Promoting growth by increasing physical capital

Illustrated by the construction of the interstate highway system in the U.S.

Improving technology (government role)

Achieved by sharing results of applied research (like GPS) under government sponsorship or with private companies.

Higher average labor productivity

Leads to higher average living standards when the share of a population employed is the same across countries.

Simple Interest

A type of interest where, for a $100 investment, 9% simple interest outperforms 7% compound interest over 5 years ($145 vs $140).

Compound Interest

A type of interest where, for a $100 investment, 7% compound interest outperforms 9% simple interest over 15 years ($276 vs $235).

Real GDP per capita and employment share

Average living standards in a country; if Country B employs 50% of its population and Country C has the same real GDP per capita but only employs 20%, Country C must have significantly higher labor productivity.

Human capital

Can be increased through investments in education and training.

Promoting growth by improving the social and legal environment

Achieved when governments improve property rights and reduce corruption.

Physical capital investment

Involves the construction of new machinery and factories.