The pattern in which low-income economies grow faster than high-income economies, narrowing the income gap between them, is called convergence.
Missing Word
convergence
Convergence is the narrowing of income differences across countries because poorer ones grow faster. Diminishing returns and the ability to copy existing technology are reasons it may happen.
Category: Convergence
Question 2
After the Industrial Revolution, some economies took off while many in Africa and Asia stayed near subsistence, producing barely enough for people to survive.
Missing Word
subsistence
Subsistence is the level of output that only just covers the food, shelter and clothing people need to stay alive. Before modern economic growth most of the world lived near it, and the uneven spread of industrialization left many economies there long after others had taken off.
Category: Modern Economic Growth
Question 3
Turning a new advance in knowledge into a product, service or production method that people actually use is called innovation.
Missing Word
innovation
Innovation is the step of putting new knowledge to practical use. Together with the discovery of the knowledge itself, it makes up technological change.
Category: Components of Growth
Question 4
Roads, bridges, ports and power grids that support an economy's production make up its infrastructure.
Missing Word
infrastructure
Infrastructure is the basic physical capital, often publicly provided, that the whole economy relies on. Investment in it adds to physical capital and can raise growth.
Category: Policies for Growth
Question 5
In the per capita aggregate production function, the three inputs are human capital per person, physical capital per person and technology per person.
Missing Word
technology
Technology per person is the third input, alongside human and physical capital per person. Labor does not appear separately because each input is already measured per person.
Category: Components of Growth
Question 6
Real GDP per capita falls whenever the population grows faster than real GDP.
Missing Word
population
GDP per capita divides output by the number of people. When the number of people rises faster than output, each person's share of output shrinks.
Category: Labor Productivity
Question 7
In growth accounting, economists measure how much of growth physical and human capital explain, and the unexplained remainder, credited to technological change, is called the residual.
Missing Word
residual
The residual is the share of growth left after the measured contributions of physical and human capital are subtracted. Growth accounting studies attribute it to technology, and in U.S. studies it is usually the largest single source of growth.
Category: Components of Growth
Question 8
Governments encourage inventors by granting patents, which give them the exclusive legal right to profit from an invention for a set period.
Missing Word
patents
A patent is a legal protection that lets an inventor keep others from using an invention for a period of time. By protecting the reward for inventing, it encourages research and technological change.
Category: Policies for Growth
Question 9
On a per capita production function graph, more capital per person causes a movement along a given curve, while a technological advance causes an upward shift of the whole curve.
Missing Word
shift
A shift means the entire curve moves, so every level of capital per person now yields more output per person. Adding capital alone only moves the economy along the existing curve, where diminishing returns set in.
Category: Components of Growth
Question 10
Marriage, religion, schooling and systems of governance are examples of institutions, the traditions and laws by which communities agree to behave.
Missing Word
institutions
Institutions are the formal and informal rules a society lives by. Strong institutions, especially secure property rights and enforceable contracts, support economic growth.
Category: Rule of Law
Question 11
In the long run, the average wage level is determined mainly by productivity, the value of output a worker produces per hour.
Missing Word
productivity
Productivity is output per unit of labor. Competition for workers pushes wages toward the value workers produce, so rising productivity is what raises wages over time.
Category: Labor Productivity
Question 12
A legally binding agreement in which one party provides a service now and the other promises to pay later is a contract.
Missing Word
contract
A contract is an enforceable agreement about property or services. Courts that enforce contracts let people trade across time with confidence, which supports growth.
Category: Rule of Law
Question 13
The misuse of public office for private gain, such as officials demanding bribes, is called corruption and weakens the rule of law.
Missing Word
corruption
Corruption undermines fair and equal enforcement of laws, makes property and contracts less secure, and discourages investment. Countries with honest, independent courts have generally grown faster.
Category: Rule of Law
Question 14
Instead of opening their economies to trade, some governments choose protectionism, shielding domestic industries from foreign competition with tariffs, quotas and similar barriers.
Missing Word
protectionism
Protectionism is the policy of using tariffs, import quotas and other barriers to shelter domestic producers from foreign rivals. A market-oriented approach to growth instead favors openness to international trade, as in special economic zones where trade goes untaxed.
Category: Policies for Growth
Question 15
Literacy, the ability to read and write, is much lower among girls than among boys in several low-income countries, which holds back the growth of human capital.
Missing Word
Literacy
Literacy is one of the most basic forms of human capital, since reading and writing make further schooling and skilled work possible. Large gender gaps in youth literacy in some low-income countries mean those economies are not fully developing half of their potential workforce.
Category: Components of Growth