Chapter Outline - Ch.12 Productivity and Growth - 10-3-07

Chapter Outline - Ch.12 Productivity and Growth - 10-3-07 -...

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Macroeconomics – Chapter 12 Outline – 10/3/07 PRODUCTION AND GROWTH - Growth rate of GDP = [ [GDP(Y2) - GDP(Y1)] / GDP(Y1) ] × 100 - If you are determining how long it will take to double, triple, etc., then use this: o Assume Y1 = 100 (or whatever you want) o Y1 +[(Growth Rate) / 100] * 100 * (X) = Y1*(2) [for double, 3 for triple, etc.] o 100 + (.14)*(100)*(X) = 200 o 100 + 14*(X) = 200 o X = Time (in years) = 7.143 years An economy’s GDP measures both the total income earned in the economy and the total expenditure of the economy’s output of goods and services. The level of real GDP is a good gauge of economic prosperity The growth of real GDP is a good gauge of economic progress. Productivity – The amount of goods and services produced for each hour of a worker’s time. o A nation’s standard of living is determined by the productivity of its workers ECONOMIC GROWTH AROUND THE WORLD Standards of living are very different between different countries around the globe, depending on which countries are being analyzed. PRODUCTIVITY: ITS ROLE AND DETERMINANTS Productivity – The quantity of goods and services produced from each unit of labor input. Why Productivity Is So Important GDP measures 2 things: o The total income earned by everyone in the economy and the total expenditure on the economy’s output of goods and services. An economy’s income is the economy’s output. A nation can enjoy a high standard of living only if it can produce a large quantity of goods and services. o Americans live better because they are more productive
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How Productivity is Determined DETERMINANTS : o 1.) Physical Capital – The stock of equipment and structures that are used to produce goods and services. Factors of Production - The inputs used to produce goods and services – labor capital, etc. Capital is a produced factor of production [capital is an input into the production process that previously was an output from the production process (like a tool to make the leg of a table – it was an output but now can be input to make tables) ] o 2.) Human Capital – The knowledge and skills that workers acquire through education, training, and experience. Human capital raises a nation’s ability to produce goods and services. o 3.) Natural Resources – The inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits. Two types: Renewable – Example: Forest Nonrenewable – Example: oil Market prices give no reason to believe that natural resources are a limit to economic growth (due to our ability to conserve these resources is growing more rapidly than their supplies are dwindling). o
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Chapter Outline - Ch.12 Productivity and Growth - 10-3-07 -...

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