Chapter 26 Economic Growth

Productivity

The quantity of goods and services produced from each unit of labor, a key determinant of living standards.

Catch-Up Effect

The tendency for poorer countries to grow more rapidly than richer countries, leading to a reduction in income disparities over time.

Diminishing Returns

The principle stating that as one input increases while other inputs are kept constant, the additional output generated from that input decreases.

Physical Capital

The stock of equipment and structures used to produce goods and services.

Human Capital

The knowledge and skills that workers acquire through education, training, and experience.

Natural Resources

Inputs into the production of goods and services that are provided by nature, such as land, water, and minerals.

Technological Knowledge

Society's understanding of how to produce goods and services efficiently; includes both common knowledge and proprietary advancements.

Investment from Abroad

Capital investment made by foreign entities, which can increase a country's total capital stock and productivity.

Public Policy

Government actions that influence the economy, particularly regarding productivity and living standards.

Education

Investment in human capital that enhances individuals' skills, with positive externalities for the economy.

Free Trade

Trade policies that allow for the unrestricted exchange of goods and services across international borders, promoting economic growth.

GDP per capita

An index for standard of living calculated by dividing a country's GDP by its population.

Foreign Direct Investment

Investment made by a foreign entity in a business that is controlled by a resident of the host country.

Capital Accumulation

The growth of capital resources, including physical capital, that can enhance an economy's productive capabilities.

Malthusian Catastrophe

A situation where population growth surpasses agricultural production capacity, leading to famine.

Circular Flow Diagram

A visual model of the economy that shows how money and goods flow through markets among households and firms.

Property Rights

The legal rights of individuals to own and control their resources, essential for a functioning market economy.

Savings Rate

The proportion of income that is saved rather than spent; higher savings can lead to increased investments.

Economic Growth

The increase in the production of goods and services in an economy over time.

Wealth Inequality

The unequal distribution of assets among residents of an economy.

Health Care Expenditure

Investment in health services, which can improve workforce productivity and overall economic performance.