Economic Growth

A collection of flashcards covering key concepts related to economic growth, its significance, determinants, and measurement.

Economic Growth

The long-run process through which an economy's potential output increases.

Rule of 72

A method to estimate the number of years required to double the value of an investment or variable, calculated by dividing 72 by the annual growth rate.

Potential Output

The maximum output an economy can produce when operating at full capacity and efficiency.

Production Possibilities Curve

A graphical representation that shows the maximum feasible amount of two goods that a country can produce given its level of technology and resources.

Real GDP

The total value of all goods and services produced in a country in a given year, adjusted for inflation.

Exponential Growth

Growth that occurs when the increase is proportional to the current value, leading to larger and larger increases over time.

Diminishing Marginal Returns

The principle that as more units of a variable resource are added to a fixed resource, the additional output generated from each new unit will eventually decrease.

Aggregate Production Function

A mathematical function that relates the total output of an economy to the total amount of labor employed, holding other factors constant.

Long-Run Aggregate Supply Curve (LRAS)

A vertical line that represents the maximum output an economy can produce when all resources are fully utilized.

GDP per capita

An economic measure that divides the GDP of a country by its total population, giving an average economic output per person.

Cyclical Fluctuations

Short-term variations in economic activity that occur due to the business cycle.

Labor Market Equilibrium

The condition in which the supply of workers equals the demand for workers, determining the real wage.

Long-run economic growth determinants

Factors that contribute to the sustained increase in the economy's output over time, such as increases in labor, capital, technology, and human capital.

Human Capital

The skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value to an organization or economy.

Macroeconomic Stability

A state in which the economy operates smoothly without large fluctuations, characterized by stable prices and steady economic growth.

Saving Rate

The portion of income that is not spent on consumption, which can be directed toward capital investment and economic growth.

Economic Freedom

The freedom of individuals to control their own economic resources, which tends to correlate with higher income levels.

Disparities in Economic Growth

Differences in the rates of economic growth experienced by different countries or regions, influenced by various structural and policy factors.