Economic Growth and Employment Review

These flashcards cover key concepts about economic growth, GDP, employment, and associated theories from the lecture notes, helping to reinforce understanding and retention.

Potential GDP

The GDP that would occur if the country was fully employing all its resources on a sustained basis, without creating inflation.

Output Gap

The difference between Real GDP and Potential GDP, used to indicate whether the economy is operating above or below its sustainable capacity.

Economic Growth Rate

The annual percentage change of real GDP, indicating how rapidly the total economy is expanding.

Real GDP per Person

Real GDP divided by the population, indicating the average economic output per individual.

Rule of 70

A formula to estimate the number of years required to double the value of a variable, by dividing 70 by the annual percentage growth rate.

Labor Productivity

The quantity of real GDP produced by an hour of labor.

Aggregate Hours

The total number of hours worked by all employed individuals, impacting potential GDP.

Economic Growth vs. Business Cycle Expansion

Economic growth refers specifically to an increase in potential GDP, contrasting with short-term increases during business cycle expansions.

Labor Market Equilibrium

The condition in the labor market when the quantity of labor demanded equals the quantity of labor supplied.

Real Wage Rate

The money wage rate adjusted for the price level, reflecting the purchasing power of wages.

Human Capital Growth

Growth derived from the education and training of workers to enhance their productivity.

Physical Capital Growth

The accumulation of physical assets such as machinery and equipment that contributes to production capacity.