ECON
Topic 3 Econ growth_ Lecturer.pptx

Topic 3 Econ growth_ Lecturer.pptx - Macroeconomics 1 TOPIC...

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Macroeconomics 1 TOPIC III: Production and Growth
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Core concept 1. Production Possibility Frontier (PPF) 2. Factors of production 3. Productivity and growth 4. Public policy and economic growth 2
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Production possibilities frontier How to achieve the greatest possible satisfaction of society’s material wants given scare resources? Full employment Full production o Allocation efficiency o Productive efficiency 3
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Represents the maximum possible combinations of goods and services that can be produced with a given quantity of factors and production and given technology. Production possibilities frontier 2 4
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PPF in more details 5
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Question 1 An “increase in efficiency” suggests that an economy: 1. Has moved from a point outside of, to a point on, its production possibilities curve. 2. Has decided to produce more consumer goods and fewer capital goods. 3. Is able to get less output from a given amount of input. 4. Is able to get more output from a given amount of input. 6
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Production and growth A country’s standard of living depends on its ability to produce goods and services. Living standards, as measured by real GDP/person, varied significantly among nations. Annual growth rates that seem small, become large when compounded for many years. 7
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Productivity: its role and determinants Productivity refers to the amount of goods and services produced for each hour of a worker’s time. Key role in determining living standards for all nations in the world. 8
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Productivity Watch the video of Productivity Definition 9
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How productivity is determined To understand the large difference in living standards across countries, we must focus on the production of goods and services. The inputs used to produce goods and services are called the factors of productions .
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