AP Econ | Unit 7: Economic Growth and Productivity Vocab

Rule of 70

tells us that the time it takes a variable that grows gradually over time to double is approximately 70 divided by that variable's annual growth rate

Labor productivity

often referred to simply as productivity, is output per worker

Physical Capital

consists of human made goods such as buildings and machines used to produce other goods and services

Human capital

the improvement in labor created by the education and knowledge of members of the workforce

Technology

the technical means for the production of goods and services

Aggregate production function

a hypothetical function that shows how productivity (output per worker) depends on the quantities of physical capital per worker and human capital per worker as well as the state of technology

Diminishing returns to physical capital

an aggregate production function exhibits this when, holding the amount of human capital per worker and the state of technology fixed, each successive increase in the amount of physical capital per worker leads to a smaller increase in productivity

Growth accounting

estimates the contribution of each major factor in the aggregate production function to economic growth

Total factor productivity

the amount of output that can be achieved with a given amount of factor inputs

Convergence hypothesis

international differences in real GDP per capita tends to narrow over time

Research and development (R&D)

spending to create and implement new technologies

Infrastructure

roads, power lines, ports, information networks, and other underpinnings for economic activity

Sustainable

long-run economic growth is sustainable if it can continue in the face of the limited supply of natural resources and the impact of growth on the environment

Depreciation

occurs when the value of an asset is reduced by wear, age, or obsolescence