I n t h I s c h a p t e r y o u w I l L

natural
resources.
Natural resources are inputs into production that are provided by
nature, such as land, rivers, and mineral deposits. Natural resources take two
forms: renewable and nonrenewable. A forest is an example of a renewable
resource. When one tree is cut down, a seedling can be planted in its place to be
harvested in the future. Oil is an example of a nonrenewable resource. Because oil
is produced by nature over many thousands of years, there is only a limited sup-
ply. Once the supply of oil is depleted, it is impossible to create more.
Differences in natural resources are responsible for some of the differences in
standards of living around the world. The historical success of the United States
was driven in part by the large supply of land well suited for agriculture. Today,
some countries in the Middle East, such as Kuwait and Saudi Arabia, are rich
p h y s i c a l c a p i t a l
the stock of equipment and
structures that are used to produce
goods and services
h u m a n c a p i t a l
the knowledge and skills that
workers acquire through education,
training, and experience
n a t u r a l r e s o u r c e s
the inputs into the production of
goods and services that are provided
by nature, such as land, rivers, and
mineral deposits

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C H A P T E R 2 4
P R O D U C T I O N A N D G R O W T H
5 3 5
simply because they happen to be on top of some of the largest pools of oil in the
world.
Although natural resources can be important, they are not necessary for an
economy to be highly productive in producing goods and services. Japan, for
instance, is one of the richest countries in the world, despite having few natural
resources. International trade makes Japan’s success possible. Japan imports many
of the natural resources it needs, such as oil, and exports its manufactured goods
to economies rich in natural resources.
Te c h n o l o g i c a l K n o w l e d g e
A fourth determinant of productivity is