Macro Chapter 6 Notes #2.docx

Macro Chapter 6 Notes #2.docx - Chapter 6 Notes The Basics...

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Chapter 6 Notes The Basics of Economic Growth Standard of living depends on real GDP per person. Only grows if real GDP grows faster than the population. Real GDP per person = Real GDP divided by population Economic Growth Versus Business Cycle Expansion Real GDP can increase for 2 reasons: 1. The economy might be returning to full employment in an expansion phase of the business cycle. NOT ECONOMIC GROWTH. 2. Potential GDP might be increasing. IS ECONOMIC GROWTH. The Magic of Sustained Growth Rule of 70 -> Number of years it takes for the level of variable to double. 70 divided by annual percentage growth rate Growth in Canadian Economy 1926-2016 growth in real GDP per person averaged 2 percent a year. Fell during great depression and rose a lot during world war II. Growth most rapid in 1960s. It slowed in 1970s and sped again in the 80s and 90s. Real GDP Growth in the World Economy Japan grew rapidly in the 1960s, slower in the 1980s, and even slower in the 1990s.
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