Economic Growth Study Guide

A set of 40 vocabulary flashcards covering key concepts related to economic growth, including definitions, formulas, and relevant examples.

Zero-sum

A situation where one person’s gain is another’s loss.

Economic growth

Total output increases, allowing everyone to become better off.

Innovations

New ideas or methods that create more goods and services.

Global GDP

The total economic output of all countries, which has risen significantly since 1800.

Healthier people productivity

Healthier individuals are more productive and capable of longer work.

Positive cycle in economic growth

Economic growth improves access to food, healthcare, and sanitation.

Poor health impact on economy

Lowers labor supply and productivity, slowing economic growth.

Living standards before 1800

Mostly stagnant prior to the Industrial Revolution.

Industrial Revolution

A period marking sustained growth in productivity and income.

Life expectancy improvements

Growth has led to higher life expectancies.

Doubling time formula

70 divided by growth rate (%) gives the number of years to double an economy.

Compounding growth differences

Small differences in growth rates can lead to large disparities in wealth.

1% vs 3% growth example

After 70 years, an economy growing at 3% is approximately four times richer than one at 1%.

Real GDP per person formula

Y/pop = (L/pop) × (Y/L), representing GDP per person.

Productivity definition

Output per worker.

Capital per worker formula

Y/L = A × (K/L)^0.3, where A is technology and K/L is capital per worker.

Diminishing returns

A principle stating that as capital increases, its additional output decreases.

Capital-labor ratio

The amount of capital per worker in an economy.

Technological progress

Improvement in technology that drives long-run economic growth.

Markets efficient allocation

Markets allocate resources efficiently through price mechanisms.

Strong institutions effect

Promote investment and innovation through stability and property rights.

Weak institutions consequences

Lead to corruption and instability, resulting in low growth.

Capital definition

Tools, machines, and infrastructure used in production.

Technology in economics

Production methods that enhance productivity.

Human capital definition

Education and skills possessed by workers.

Typical U.S. growth rate

Approximately 2% per year.

China's growth rate

Ranges from 6% to 8% per year.

Developing countries' growth rate

Typically between 1% and 4%.

High-income countries' growth rate

Generally around 1% to 3%.

Soviet Union decline factors

Diminishing returns and lack of innovation reduced efficiency.

Curse of resources definition

Resource-rich nations may experience slower growth due to dependence on commodities.

Volatile resource prices impact

Discourage innovation in resource-rich nations.

Economic systems overview

Different systems include command (government decision), market (private decision), and mixed economies.