BA Economic Growth

How is Growth Defined?

An increase in Real GDP occurring over some time period

What is Per Capita Growth?

An increase in Real GDP per person occurring over some time period

Can there be (positive) growth if Per Capita GDP is declining?

Understand this 

Understand slide 3- the equation 

What is the trend line in macroeconomics?

The trend line represents the long-run growth path of an economy’s GDP, showing the overall direction of economic growth over time

What is the difference between the trend line and the fluctuations around it?

The trend line shows long-run growth, while the fluctuations around it represent short-term ups and downs in the economy, known as business cycles.

What are business cycles?

Business cycles are the short-run fluctuations of the economy around the long-run trend line.

What do the terms “peak” and “trough” mean in a business cycle?

A peak is the highest point of economic growth before a downturn (recession)

A trough is the lowest point before the economy begins to recover (expansion).

Why do business cycles matter less in the long run?

Because in the long run, short-term ups and downs average out, and what matters most is the overall upward trend in economic growth (the trend line).

What does macroeconomics focus on in terms of growth?

Macroeconomics focuses on the long-run effects of growth, represented by the trend line.

When did long-term economic growth begin, and how was world per capita GDP before that?

Long-term growth is a relatively new phenomenon. Until about 1830, world per capita GDP remained constant with little to no sustained growth.

How has the pace of economic growth changed from the 20th century to recent years?

During the 20th century, economic growth became exponential, with the fastest growth occurring between 1945 (end of World War II) and 1973. In recent years, growth has continued but at a slower pace.

How has GPD changed during the years - in very general?

GPD growth is something very new, for a long time it was very stable 

How was GPD in the pre modern era?

Before they did things with land and labor, more land means more labor, which does not change the GDP per capita at all 

How did industrialization change everything?

The steam engine changed everything because that made economic growth actually grow fast, there is not a limit to what can people produce

Why is credit important for economic growth and business creation?

Without credit, people are trapped because they cannot easily open or expand businesses. C

Credit allows more investment and production, which helps the economy grow.

How has the role of credit changed from the past to today?

credit was very limited and worked differently, but today there is much more credit available.

Why was there no credit in the past?

credit existed but was limited and costly because people lacked trust in the future and believed wealth was fixed, making the economy a zero-sum game.

is there trust in the future economy today, why?

Today there is so much trust in the future that banks can keep  very small reserves, extend their credit and give large, long-term and low interest rate loans.

what are the 4 ways that Economic growth in the last two centuries has made a striking change in human condition?

• Higher life expectancy.

• Higher literacy level and education

• Lower child mortality.

• Humans are  better fed, clothed and housed.

How has child mortality been through the years?

it has decreased SO MUCH, 40 years ago 40% of kidsdied before the age of 5 

How has life expectancy been through the years?

Over the last 200 years, impressive progress  in life expectancy. 

Is life expectancy good everywhere? example

There are still huge differences between countries: people in Sub-Saharan countries have life expectancy of less than 60 years, while in Japan it exceeds 80.

Is literacy good everywhere?

Over the last  100 years, impressive progress  in literacy rates

What pattern can you see between the two age groups in literacy? (15-24 and 60) 

Younger people (15–24) have much higher literacy rates almost everywhere compared to older people (65+), showing global progress in education over time.

Which regions show the biggest gap in literacy between young and old?

The largest gaps appear in Africa, the Middle East, and South Asia, where older generations often have low literacy rates, but younger generations are now much more educated.

What is poverty defined as, for these graphs and stuff?

Poverty is defined as living with an income of $2 dollars a day

How has poverty been throughout the years?

Poverty has definitely decreased over the years

1970: 2.2 billion people living in extreme poverty.

2015: 705 million people living in extreme poverty.

What has been the average rate of per capita economic growth in leading industrialized countries over the last two centuries?

About 2% per year on average.

Why do small annual growth rates matter over time?

Because even a “small” 2% annual growth rate, when compounded over 200 years, increases per capita GDP by more than 52 times — showing how steady growth leads to huge long-term gains.

How has the average person changed in money over the last 200 years?

The average person in economy that lasts 200 years becomes two times richer

Understand slide 21

Okay

Understand the rule of 72?

Shows the number of years required for an economy to double, at a given annual rate of growth

• 72 ÷ annual % growth ≈ Years to double value

• An economy that grows at 2% per year will double its GDP in about 36 years 

  • (72 ÷ 2 = 36)

• An economy that grows at 7% per year will double its GDP in just over 10 years 

  • (72 ÷ 7 = 10.3)

• An investment that earns a 4% annual return will double in value in about 18 years 

  • (72 ÷ 4 = 18)

How has the US and China economies grown? How is the line of each? 2010-2035 

China started lower but has grown steeper and now its more steep 

US started higher and its more linear and consistent, its lower now 

Understand slides 24,25,26 about US and China

Understand

USA has become the leading economic power from the second half of the 20^th century.

has become the leading economic power from the second half of the 20^th century.

Understand

Unprecedented growth 1950-1990

• The “Japanese Miracle”

• Growth rate of 8-9% per year

What was the main idea behind the globalization promise of the 1990s and 2000s?

That by privatizing, liberalizing, and globalizing their economies, countries could achieve greater prosperity and economic growth.

How did public attitudes toward globalization change after the 2008 financial crisis?

Many people became disillusioned, leading to resistance against immigration, trade agreements, and global integration, seen in movements like Brexit and “America First.”