EC 202 Chapter 4 - EC 202, Chapter 4 1 Productivity and...

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EC 202, Chapter 4 – 1 Productivity and Living Standards Macroeconomics Macroeconomics: The study of the performance of national economies including the study of the policies used to improve that performance. Macroeconomic Policies: Government actions designed to affect the performance of the economy as a whole. Major Macroeconomic Issues: Economic growth and living standards Labor productivity Recessions and expansions Unemployment Inflation International Economic Interdependence Living Standards: Standard of living The degree to which people have access to goods and services that make their lives easier, healthier, safer, and more enjoyable o Good are physical objects and services are work done for people – both are valued and produced to satisfy human wants In wealthy industrialized nations the standard of living is better than at any previous time or place in history Typically, economic growth improves the standard of living of most people although not everyone shares equally in the benefit Economic Growth:
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A process of steady increase in the quantity and quality of goods and services the economy can produce In 2004, the output of the U.S. economy was nearly 33 times what was in 1900 and over 6 times its level in 1950 What caused this growth? Can it continue? Should it? Output of the U.S. Economy, 1900-2004 Output of the U.S. Economy, 1990-2008 Consumption Patterns Around the World Output Per Person One reason for the increased growth is the rapid growth of the U.S. population o More workers are available to make more output Since more people are sharing those goods and services, the standard of living may not be increasing Hence, output per person is a better indicator of the average living standard over time Macroeconomic Performance Standard of living depends on o Quantities of goods and services produced o Number of people who share those goods and services The greater the values of production per person, the higher is the standard of living U.S. population: 297,536,520 (October 29, 2005) o Net gain of one person every 10 seconds
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World population: 6,475,571,256 Output per Person and per Worker in the U.S. Economy, 1900-2004 Average Labor Productivity Output per employed worker o Average amount of output per employed worker Equal to total output/number of people employed o In 2001 more than 5 times higher than in 1900 o Rate of improvement has slowed since the 1970s, but has increased
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EC 202 Chapter 4 - EC 202, Chapter 4 1 Productivity and...

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