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economic growth and rule of 70
What is the primary goal of economic systems, and why?
Economic systems strive to achieve economic growth to improve living conditions and to address population growth.
What is economic growth?
Economic growth is the continuous real increase in real GDP per capita over time.
Why is it important to focus on real GDP growth?
Real GDP excludes the effects of inflation and measures the actual increase in the production of goods and services, providing a more accurate measure of economic expansion
What is the Production Possibility Curve (PPC)
The PPC is an economic tool that illustrates the production possibilities of a country, showing the maximum combinations of two goods or services that can be produced with available resources.
What does a point on the PPC signify
A point on the PPC signifies productive efficiency, meaning resources are fully employed and goods are produced in the least costly way.
What does a point inside the PPC signify?
A point inside the PPC signifies inefficiency and unemployment, indicating that resources are not being fully utilized.
What does a point outside the PPC signify?
A point outside the PPC is impossible or unattainable with current resources.
What is Allocative Efficiency?
Allocative Efficiency refers to the production point where the social preference curve intersects the PPC and indicates the maximum output that aligns with society's desires.
What is GDP growth?
GDP growth is the increase in the value of goods and services produced within a specific economy over a period, reflecting the health of the economy.
What factors lead to GDP Growth?
GDP growth is caused by an increase in investments, technological advancement, increase in workforce, improvement in human capital and international trade
What is the Rule of 70?
The Rule of 70 is an economic rule used to determine the time it takes for an investment or economy to double in value based on a fixed annual growth rate. It's calculated as 70 divided by the annual growth rate.
How do you calculate the time it takes for something to double using the rule of 70?
Time to Double = 70 / Annual Growth Rate
What does a high economic growth rate mean in terms of the Rule of 70?
A higher growth rate means it takes less time for the economy to double its output, leading to faster increases in national income and living standards.
What is GDP per capita?
GDP per capita is an economic measure used to determine the average income or economic output per individual in a country8. It is calculated by dividing GDP by the population.
How do you calculate GDP per capita?
GDP per capita = Real GDP / Population.
What is Real GDP?
Real GDP is the value of goods and services produced in a country, adjusted for inflation.
Why is GDP per capita an important metric?
GDP per capita is used as an indicator of living standards and well-being in an economy.
How do you calculate Real GDP if you have Nominal GDP and the GDP deflator?
Real GDP = (Nominal GDP / GDP Deflator) * 100
