Ch. 12 Vocab

production function

the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs

aggregate production function

the relationship between all the inputs used in the macroeconomy and the economy's total output (GDP)

marginal product

the change in output divided by the change in input

diminishing marginal product

occurs when the marginal product of an input falls as the quantity of the input rises

steady state

the condition of a macroeconomy when there is no new net investment

depreciation

a fall in the value of a resource over time

net investment

gross investment - depreciation

convergence

the idea that per capita GDP levels across nations will equalize as nations approach the steady state

New Growth Theory

approach to long-run growth that focuses on technological change and the incentives fostering innovation inside an economy

gross domestic product

the measure of an economy adopted by the United States in 1991; the total market values of goods and services produced by workers and capital within a nation's borders during a given period