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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Real GDP per capita
Dividing real GDP by size of population
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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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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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Leader countries
Rich countries with real GDP per capita that grows by 2-3% per year
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Follower countries
Can grow much faster because they can simply adopt existing technologies from rich leader countries
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Supply factors
Changes in the physical and technical agents of production
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quantity of labor
Increases in ________ + increases in labor productivity cause economic growth.
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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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Efficiency factor
To reach its full production potential, an economy must achieve economic efficiency as well as full employment
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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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Real GDP per capita
Dividing real GDP by size of population
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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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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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Leader countries
Rich countries with real GDP per capita that grows by 2-3% per year
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Follower countries
Can grow much faster because they can simply adopt existing technologies from rich leader countries
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Supply factors
Changes in the physical and technical agents of production
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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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Efficiency factor
To reach its full production potential, an economy must achieve economic efficiency as well as full employment
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Labor productivity
Measured as real output per hour of work
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Labor-force participation rate
Percentage of the working-age population actually in the labor force
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Growth accounting
System to assess the relative importance of the supply-side elements that contribute to changes in real GDP
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Infrastructure
Highways and bridges, public transit systems, wastewater treatment facilities, water systems, airports, educational facilities, and so on
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Human capital
Knowledge and skills that make a worker productive
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Economies of scale
Reductions in per-unit production costs that result from increases in output levels
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Information technology
Combination of the computer, fiber-optic cable, wireless technology, and the Internet
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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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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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Learning by doing
Firms that produce new products or pioneer new ways of doing business experience increasing returns
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