Economic Growth and Productivity

These flashcards cover core concepts related to economic growth, productivity, and labor market dynamics, preparing the student for exam questions on these topics.

Potential GDP

The GDP that would occur if the country was fully employing all its resources on a sustained basis without creating inflation.

Output Gap

The difference between Real GDP and Potential GDP; indicates economic performance relative to capacity.

Real GDP per person

Real GDP divided by the population, indicating the standard of living.

Economic Growth Rate

The annual percentage change of real GDP, showing how rapidly the economy is expanding.

Rule of 70

A formula that estimates the number of years required to double the value of a variable growing at a specific annual rate.

Labor Productivity

The quantity of real GDP produced by an hour of labor.

Aggregate Production Function

A model showing how real GDP changes as the quantity of labor changes, keeping other production factors constant.

Long-Term Growth Trends

Historical patterns of economic growth, showing variations in growth rates over decades.

Labor Market Equilibrium

The condition in which the quantity of labor demanded equals the quantity of labor supplied at a certain real wage rate.

Diminishing Returns

An economic concept stating that as more labor is employed, the additional output generated by each new worker decreases.