Chapter 12 (ME)

GDP per capita

Real GDP divided by the population, representing the average economic output per person in a country.

Real GDP

The inflation-adjusted value of all goods and services produced in a country.

Productivity

The average quantity of goods and services produced per unit of labor input.

Physical Capital (K)

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

Human Capital (H)

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

Natural Resources (N)

Inputs into production provided by nature, such as land and mineral deposits.

Technological Knowledge (A)

Society's understanding of the best ways to produce goods and services.

Catch-Up Effect

The phenomenon where poorer economies grow faster than wealthier ones due to lower initial capital.

Diminishing Returns to Physical Capital

The principle that as more capital is added per worker, the marginal benefit gained from each additional unit decreases.

Foreign Direct Investment (FDI)

Capital investment owned and operated by a foreign entity.

Foreign Portfolio Investment (FPI)

Capital investment financed with foreign money but operated by domestic residents.

Malthus' Theory

The idea that population growth will surpass resources, leading to decline in living standards.

Paul Ehrlich's Prediction

The assertion that unsustainable resource use will lead to mass starvation and death, which has been disproven by technological advancements.

Economic Progress Indicators

Growth of real GDP per capita over time serves as a good gauge of economic prosperity and living standards.

Investment Spending

Expenditure by firms on physical capital, which is essential for productivity growth.