a. the increase in the size of the labour force.

b. the increase in the labour force participation rate.

c. the increase in productivity.

d. the increase in human capital—the skills embodied in the work forc

e.

ANSWER: C

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Short Answer

1. What is productivity and why is it important?

RESPONSE:

ANSWER: Productivity is the amount of goods and services produced from each hour of a

worker's time. It is the major determinant of the standard of living of a country.

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2. How is productivity determined?

RESPONSE:

ANSWER: Productivity is determined by a country's physical capital, human capital, natural

resources and technological knowledge.

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3. What is the World Bank and what are its functions?

RESPONSE:

ANSWER: The World Bank is an international organization that among other things

encourages the flow of capital to poor countries. It obtains funds from the world's advance counties and loans them to less developed countries so that they can invest in capital infrastructure. The World Bank offers advice to developing countries on how the funds might best be used.

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4. What are property rights? What role does property rights play in economic growth?

RESPONSE:

ANSWER: Property rights refer to the ability of people to exercise authority over the resources

they own. There must be an economy-wide respect for property rights for the price system or the free market to work. Lack of respect for property rights or the enforcement of property rights would not only