Chapter 7 outline - Chapter 7 outline Long-run and...

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Chapter 7 outline Long-run and Short-run concerns: Growth, productivity, unemployment, and inflation. I. Introduction a. An Ideal economy-rapid growth of output per worker, low unemployment, and low inflation. b. Output growth - the growth rate of the output of the entire economy. c. Per-capita output growth - the growth rate of output per person in the economy. d. Productivity growth - the growth rate of output per worker. e. Output growth is simply keeping up with the population f. Output per worker is larger than output per person and it is called productivity II. Long-run output and productivity growth a. Growth theory - concerned with the question of what determines this rate b. Capital - anything that is produced then used as an input to produce other goods and services. i. Capital can be tangible or intangible ii. Human capital -the knowledge and skills acquired through education and training. 1. People are said to be adding to their human capital if they increase their mental or physical skills iii. Capital can also be public or private c. The economy needs capital and labor in order to produce output. d. How do we increase output? i. Add more workers(increase labor) ii. Add more capital (machines) iii. Increase the length of the workweek. iv. Increase the quality of the workers 1. Ex.: increase education or physical shape v. Increase in the quality of capital e. Labor productivity - output per worker hour
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f. The slope of each line segment is the growth rate of productivity along the segment III. Recessions, Depressions, and Unemployment a. Periodic ups and downs in the economy b. Recession - roughly, a period in which real GDP declines for at least two consecutive quarters. Marked by failing output and rising unemployment. c. Real GDP is a measure of the actual output of goods and services in the economy during a given period. i. When GDP falls, less is being produced ii. When less output is produced, fewer inputs are used, employment declines, the unemployment rate rises, and a smaller percentage of the capital stock at out disposal is utilized. iii. When real output falls, real income declines.
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This note was uploaded on 04/26/2009 for the course ECO 304K taught by Professor Hickenbottom during the Spring '10 term at University of Texas at Austin.

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Chapter 7 outline - Chapter 7 outline Long-run and...

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