nominal exchange rate

the price of one country's currency in units of another country's currency

purchasing power parity (PPP)

constructs the cost of a representative basket of commodities in each country and uses the relative cost of these baskets for comparing income across countries. GDP per capita= GDP per capita in local currency * PPP adjustment

value of goods and services that a worker generates for each hour of work

Productivity differences

the ultimate drives of income per capita and income per worker differences across countries 3 main reasons: human capital, physical capital, technology

the stock of skills embodied in labor to produce output. (total efficiency units of labor) H= L*h L= total number of workers h= average human capital or efficiency

stock of business structures(plants) and equipment (machines) used for production.

superior knowledge in production or more efficient production process so that more output can be produced with the same amount of human and physical capital. can be embodied or contained in H and K

aggregate production function

models thew relationship between aggregate GDP and its factors of production. Y= A*F(K,H) Y=GDP K= physical capital stock H= total eff. units of labor F= mathematical fiucntion A= index of technology

Law of diminishing Marginal produce

the marginal contribution of either physical capital or total efficiency units of labor to GDP diminishes when we increase the quantity used of that factor( holding all other factors of production constant)

Technology shift the production function upward

with more advanced technology, more output can be produced with the same amount of physical capital and total efficiency units of labor

technology has 2 components

knowledge, efficiency in production

as a direct result of scientific/technological advancements, we know more about the physical processes involved in production

Efficiency in production

ability to perform certain tasks more efficiently, that is, ability to produce the maximum amount of output, from a given amount of K,H, and knowledge

Workers and capital today possess...

1) knowledge of how to produce new goods 2) knowledge of how to perform certain tasks more efficiently

Moore's law predicts that the number of transistors packed on a computer chip should double every 2 years

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ch 6 econ

Question	Answer
nominal exchange rate	the price of one country's currency in units of another country's currency
purchasing power parity (PPP)	constructs the cost of a representative basket of commodities in each country and uses the relative cost of these baskets for comparing income across countries. GDP per capita= GDP per capita in local currency * PPP adjustment
productivity	value of goods and services that a worker generates for each hour of work
Productivity differences	the ultimate drives of income per capita and income per worker differences across countries 3 main reasons: human capital, physical capital, technology
Human capital	the stock of skills embodied in labor to produce output. (total efficiency units of labor) H= L*h L= total number of workers h= average human capital or efficiency
physical capital	stock of business structures(plants) and equipment (machines) used for production.
Technology	superior knowledge in production or more efficient production process so that more output can be produced with the same amount of human and physical capital. can be embodied or contained in H and K
aggregate production function	models thew relationship between aggregate GDP and its factors of production. Y= A*F(K,H) Y=GDP K= physical capital stock H= total eff. units of labor F= mathematical fiucntion A= index of technology
Law of diminishing Marginal produce	the marginal contribution of either physical capital or total efficiency units of labor to GDP diminishes when we increase the quantity used of that factor( holding all other factors of production constant)
Marginal product of human capital decreasing	holding K constant
Marginal product of physical capital is decreasing	holding H constant
Technology shift the production function upward	with more advanced technology, more output can be produced with the same amount of physical capital and total efficiency units of labor
technology has 2 components	knowledge, efficiency in production
knowledge	as a direct result of scientific/technological advancements, we know more about the physical processes involved in production
Efficiency in production	ability to perform certain tasks more efficiently, that is, ability to produce the maximum amount of output, from a given amount of K,H, and knowledge
Workers and capital today possess...	1) knowledge of how to produce new goods 2) knowledge of how to perform certain tasks more efficiently
Moore's law	Moore's law predicts that the number of transistors packed on a computer chip should double every 2 years

Created by: user-1742075

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