Econ Chapter 15 Part 1

_____ are symptoms of our economic progress

new products

what is the effect of producing more goods and new and better goods over time?

our living standards rise

economic growth

an increase in output, an expansion of production possibilities, and changes in potential GDP

the easiest kind of growth comes from ______

increased use of our productive capabilities

in any given year, there's a ______ to an economy's potential output

limit

this limit is determined by what?

the quantity or resources available and our technological know-how

the economy often produces a ____ of output that lies _______

mix

inside the PPC

if a mix of output lies inside the PPC, then what will the short run goal of macro policy be?

to achieve full employment

over time, _____ in capacity are critical

increases

short run increases in the utilization of existing capacity can generate ___________

only modest increases in output

to achieve large and lasting increases in output, we must _______

push our production possibilities outwards

pushing our production possibilities outwards, implies what?

an increase in potential GDP (productive capacity)

The AS curve sets a limit to ______

demand-side policy

in the short run, the slope of the AS curve determines what?

how much inflation we have to experience to get more output

in the long run, the position of the AS curve ______

limits total output

to get a long run increase in output, we must ______

increase the AS curve

economic growth is only possible if what?

the AS curve shifts rightward

increases in nominal GDP can result from what?

either increases in the price level or increases in the quantity of output

nominal GDP can rise even when ______

the quantity of goods and services fall

Real GDP avoids the ______ of inflation by ______

distortions

valuing output in constant prices

growth rate

percentage change in real GDP from one period to another

U.S growth rates are usually _____

positive

- averaging about 2.7% a year

what is the challenge for the future?

to maintain higher rates of economic growth

even one year's low growth implies what?

lost output

economic growth rate is a ______ or specifically, an ______ process

continuing

exponential

how is economic growth an exponential/continuing process?

- gains made in one year accumulates in future years (like interest)

- each little shift of the PPC broadens the base for future GDP

- as shifts accumulate, the economy's productive capacity expands

GDP per capita

total GDP / total population

-average GDP

growth in GDP per capita is attained only when _______

the growth of output exceeds population growth

- usually attained by the U.S

rising GDP per capita is a relatively new phenomenon. How?

world GDP per capita hardly grew for 1500 years

- it's only since 1820 that world output has grown significantly faster than the population

many poor countries suffer from a combination of ______

slow GDP growth and fast population growth

why did living standards rise in the 90's in the U.S?

the labor force grew faster than the population

when the number of workers grows faster than the population ____ will rise. when the unemployment rate declines, increases in _______ becomes more difficult.

GDP per capita

per capita

how do we offset the decline in the employment rate?

by increasing the output per worker

the total quantity of output produced depends on what?

- how many workers are employed

- how productive each worker is

if productivity is increasing, then _____ is likely to rise

GDP per capita

productivity

output per unit of input - output per labor hour

historically, what has been the major source of economic growth?

productivity gains

why are we now able to consume more goods and services than our parents did?

the average worker produces more

if we want consumption levels to keep rising, individual workers will have to ____

produces more output each year

sources of productivity gains

- higher labor skills

- more capital

- improved management

- technological advancement

higher labor skills

an increase in labor education and training

more capital

an increase in the ratio of capital to labor

improved management

better use of available resources in the production process

technological advancement

the development and use of better capital equipment

human capital

the knowledge and skills possessed by the workforce

- as human capital levels rise, so does productivity

what is a prime determinant of productivity and growth?

capital investment

improvements in output per worker depends on what?

increases in the quantity and quality of capital equipment

resources must be organized into a _____ and managed

production process

what are major determinants of economic growth

entrepreneurship and the quality of continuing management

it's difficult to characterize differences in ______or to measure their ______

management techniques effectiveness

cutting investment spending: short run effects? long run effects?

short run: increase profits

long run: reduce its growth potential and long term profitability

managers must learn to ______

motivate employees to their maximum potential

how do managers maximize productivity?

they must develop personnel structures and incentives that make employees want to contribute to production

research and development (R&D)

broad concept that includes scientific research, product development, innovations in production technique, and the development of management improvements

- greatest contributions to economic growth

insights developed from R&D lead to ______

new products and cheaper ways or producing them

advances in _______ and ______ typically go hand in hand

technology capital investment