Chapter 7

Chapter 7 - Chapter 7 Economic Growth Productivity and...

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Chapter 7: Economic Growth, Productivity, and Living Standards A. Introductory Comments 1. Changing Focus in Macroeconomics: the Long Run 2. Economic Development: Why are some countries rich and some countries poor? a. We don’t fully know. If we did and could do something about it, that would make the situations intentional. b. With few exceptions, countries that are rich now have been rich for the past 50-100 years. c. Mainstream economists look at this situation using growth theory: Why do economies grow? B. Growth Theory: Model 1. y/pop = (y/N)(N/pop) THIS IS JUST AN IDENTITY a. Where: i) y = real GDP ii) N = number of workers iii) Pop = population of the country b. What does each section mean? i) y/pop measure of living standard (per capita GDP) ii) y/N measure of productivity iii) N/pop percentage of total population that is working 2. Assumptions a. y/pop is a measure of living standards b. WORKER is defined as a person working in the legitimate market economy. 1
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Chapter 7: Economic Growth, Productivity, and Living Standards c. (LATER) The same factors cause growth in both rich and poor countries. i)
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Chapter 7 - Chapter 7 Economic Growth Productivity and...

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