Lecture 11 - borrowers) Education systems Transportation...

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Lecture 11 3/6/08 Annual Changes in U.S. Economic Output Labor force growth = 1% Productivity Growth = 2.5% Y/Y > N/N Maximum sustainable Growth rate = 3.5% • Productivity Growth: Y/Labor hours) = F(1. K/L hours - physical and human capital (2. Technology - better capital and management Rule of 70: Number of years to double = 70/growth rate U.S. Average productivity growth rate = 2.5% Y/N will double in 70/2.5 = 28 years Economic growth is also a function of good government 1. Secure private property rights (land, cars, etc. .) 2. Contract enforcement (Loan) 3. Facilitate development of Efficient financial system (to move money from savers (households) to
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Unformatted text preview: borrowers) Education systems Transportation systems (roads, highways.) Communication systems Potential Real GDP: The level of GDP attained when all rms are producing at capac-ity. 84% Capacity Utilization Rate (some industries are dyeing and some growing) 5% Unemployment Rate Growth in potential real GDP is estimated to be 3.5% a year The Macroeconomics of Saving and Investment Recall: Y=C+I+G+X-M Assume closed economy, X=M=0 Y=C+I+G Rearrange: I=Y-C-G S=S private +S public S=(Y+TR-C-T)+(T-G-TR) = S =Y-C-G (savings =investment)...
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This note was uploaded on 04/15/2008 for the course ECON 102 taught by Professor Drozd during the Spring '08 term at Wisconsin.

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