Ch. 16 Economic Growth and Prosperity

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4 Terms

1
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Why is economic growth important?

• Leads to higher incomes, better health, longer life expectancy
• More goods/services per person (higher per capita GDP)
• Allows cleaner environment & more leisure time

2
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What three things lead to economic growth?

  • Gains from trade

  • Entrepreneurial discovery/innovation

  • Investment in physical & human capital

3
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What six institutions create the conditions that lead to economic growth?

  • Strong legal system / property rights

  • Competitive markets

  • Stable money & prices

  • Avoidance of harmful regulations

  • Low marginal tax rates

  • Openness to international trade

4
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How does institutional quality correlate to standards of living/human well-being?

• Much higher income
• Faster growth
• Lower poverty
• Longer life expectancy
• Better environmental quality