Chapter 13: Economic Growth

Capital Deepening

Increases in the stock of capital per worker

Technological Progress

More efficient ways of organizing economic affairs that allow an economy to increase output without increasing inputs (human capital plays a role)

Real GDP per Capita

Gross domestic product per person adjusted for changes in prices. It is the usual measure of living standards across time and between countries

Growth rate

Percent change in a variable from one period to another

The rule of 70

A rule of thumb that says output will double in 70/x years, where x is the % rate of growth

Convergence

The process by which poorer countries close the gap with richer countries in terms of real GDP per capital me

Saving

Income that is not consumed

Stock of Capital depends on:

Gross investment and depreciation

Net investment

Gross investment minus depreciation

Growth accounting

A method to determine the contribution to economic growth from increased capital, labor, and technological progress

Labor productivity

Output produced per hour of work

Causes of technological progress

• research and development funding

• Creative destruction

• Scale economies

• Induced innovation

Creative destruction

The View that a firm will try to come up with new products and more efficient ways to produce products to earn monopoly profits

Scale of market

Selling in larger markets gives greater opportunity for profits

Induced innovations

Innovation specifically designed to reduce costs

New growth theory

Modern theories of growth that try to explain the origins of technological ++_£/i0”

Property rights

Government incentive to invest 9 €€09€0;0