Chapter 25: Economic Growth

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Economic growth

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41 Terms

1

Economic growth

An increase in real GDP occurring over some time period OR An increase in real GDP per capita occurring over some time period

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2

Real GDP per capita

Dividing real GDP by size of population

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3

Rule of 70

We can find the number of years it will take for some measure to double, given its annual percentage increase, by dividing that percentage increase into the number 70

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4

Modern economic growth

Sustained and ongoing increases in living standards that can cause dramatic increases in the standard of living within less than a single human lifetime

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5

Leader countries

Rich countries with real GDP per capita that grows by 2-3% per year

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6

Follower countries

Can grow much faster because they can simply adopt existing technologies from rich leader countries

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7

Supply factors

Changes in the physical and technical agents of production

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8

quantity of labor

Increases in ________ + increases in labor productivity cause economic growth.

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9

Demand factor

To achieve the higher production potential created by the supply factors, households, businesses, and government must purchase the economy’s expanding output of goods and services

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10

Efficiency factor

To reach its full production potential, an economy must achieve economic efficiency as well as full employment

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11

Economic growth

An increase in real GDP occurring over some time period OR An increase in real GDP per capita occurring over some time period

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12

Real GDP per capita

Dividing real GDP by size of population

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13

Rule of 70

We can find the number of years it will take for some measure to double, given its annual percentage increase, by dividing that percentage increase into the number 70

New cards
14

Modern economic growth

Sustained and ongoing increases in living standards that can cause dramatic increases in the standard of living within less than a single human lifetime

New cards
15

Leader countries

Rich countries with real GDP per capita that grows by 2-3% per year

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16

Follower countries

Can grow much faster because they can simply adopt existing technologies from rich leader countries

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17

Supply factors

Changes in the physical and technical agents of production

New cards
18

Demand factor

To achieve the higher production potential created by the supply factors, households, businesses, and government must purchase the economys expanding output of goods and services

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19

Efficiency factor

To reach its full production potential, an economy must achieve economic efficiency as well as full employment

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20

Labor productivity

Measured as real output per hour of work

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21

Labor-force participation rate

Percentage of the working-age population actually in the labor force

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22

Growth accounting

System to assess the relative importance of the supply-side elements that contribute to changes in real GDP

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23

Infrastructure

Highways and bridges, public transit systems, wastewater treatment facilities, water systems, airports, educational facilities, and so on

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24

Human capital

Knowledge and skills that make a worker productive

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25

Economies of scale

Reductions in per-unit production costs that result from increases in output levels

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26

Information technology

Combination of the computer, fiber-optic cable, wireless technology, and the Internet

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27

Increasing returns

A given percentage increase in the amount of inputs a firm uses leads to an even larger percentage increase in the amount of output the firm produces

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28

Network effects

Increases in the value of the product to each user, including existing users, as the total number of users rises

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29

Learning by doing

Firms that produce new products or pioneer new ways of doing business experience increasing returns

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30

Con

Negative externalities, doesnt solve sociological problems, unsustainable

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31

Pro

Better living standards, improved infrastructure, reduced poverty

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32

Labor productivity

Measured as real output per hour of work

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33

Labor-force participation rate

Percentage of the working-age population actually in the labor force

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34

Growth accounting

System to assess the relative importance of the supply-side elements that contribute to changes in real GDP

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35

Infrastructure

Highways and bridges, public transit systems, wastewater treatment facilities, water systems, airports, educational facilities, and so on

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36

Human capital

Knowledge and skills that make a worker productive

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37

Economies of scale

Reductions in per-unit production costs that result from increases in output levels

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38

Information technology

Combination of the computer, fiber-optic cable, wireless technology, and the Internet

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39

Increasing returns

A given percentage increase in the amount of inputs a firm uses leads to an even larger percentage increase in the amount of output the firm produces

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40

Network effects

Increases in the value of the product to each user, including existing users, as the total number of users rises

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41

Learning by doing

Firms that produce new products or pioneer new ways of doing business experience increasing returns

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