Chapter 7

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

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Chapter 7: Economic Growth, Productivity, and Living Standards Power of Compound Growth – the fact that small differences in growth rates, maintained over long periods, will produce large differences in magnitude Compound Interest – the payment of interest not only on the original deposit but on all previously accumulated interest Rule of 72 – a rule of thumb stating that to find the number of years it takes a magnitude to double when it is growing at a constant rate, divide 72 by the growth rate Diminishing Returns to Capital – if the amount of labour and other inputs employed is held constant, then the greater the amount of capital already in use, the less an additional unit of capital will tend to add to production Entrepreneurship – behaviour that results in new products, services, technological processes or organizational innovations that are productivity-enhancing Huge improvements in standard of living, since large increase in real GDP per person Power of compound growth small differences in growth rates, if continued over long periods can produce large differences in real GDP per person and average standard of living Thus rate of long-term economic growth is an economic variable of critical importance Real GDP per person is the product of average labour productivity and the share of the population
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Chapter 7 - Chapter 7: Economic Growth, Productivity, and...

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