Unformatted text preview: 3 1 1 70 = Years to double - 70 + growth rate this rule shun difference in growth compound over time, It leads to large different was it takes for red ration.
Rule of it growth is slowly fails to raise living standards- less living in economies with low or no economic growth suffer from stomatait fence in the no. + tricities, health and eduin
High income country ( industrialised), Newly industrialising country, Developing country
Living standard of living : income, increase in technology , knowledge (education), health, individual rights (halted ), political stability ( is go ), etc
Economic growth depend on: 1 Economic growth model ( explains changes in real GDP per capita(KD) in the long run. @ Labour, product
produced by one worker or by one hour of work) (3Technology change ( change in the ability of a firm to produce on
Economic Human capital The accumulated knowledge and skills works acquire from education and training or from their let
productivity ( The quantity of goods and services that be
Was machinery and equipment , increases in human capital / $3 organising and managing produc
Once output with a given gun
quantity of inputs )
Growth , is Helps economies avoid diminishing returns to capital AND shift the per-worker production function upwards s $ technology ches
AND In a long run , a country will experience an increasing standard of living only if it experiences countinating technology change
Government policy= @ Protecting intellectual property with patents ($ 19) and copyright ( Here) @Subsidising whils) research and develop
LaHelp increase the accumulation of knowledge capital PS: patents is the exclusion legal right to a product for a
adevelopment 3 subsidising education
Caused the productivity slowdown: WHigh oil prices @ Regulated markets (It stiffed competition, innvoration, and market flexibility)
uck for a period of time from the date product was invented
O Trade protection ( PR 43)69 20 #1. OAT-AndA Ris : ; Rik) 4 Tariff(BIRD)
Low income country ( low economic growth)" law (/-FREE), War, poor education, poor health, technology (slow to change), low saving, low investment
best:" Globalisation (PKGJJRA-B) ". invest other country can help low income country economic growth.
fox of economic growth : Globalisation undermines distinctive cultures pollution & global warming () multinational ( 83) firms exploit ( AP) low wages
and poor health, safety and environmental regulations, in the developing world .
( TIVE IKE GAL )
Working-age - population= Labour force + not in labour force
Unemployment rate =
Number of unemployment
Problem with measuring the * *:(During a recession HERE), discourage workers increases.', not in labour force , Office unemployment rate appears lower than it would
2 Did not measure the worker time of worker People who daim to be unemployed but are not ( HE (3 3 2E 4 X / BI)
Cost to economic : loss of gross domestic product (GDP), loss or deterioration of human capital, Retraining cost
to government: unemployment benfit, opportunity cost of funds directed toward unemployment benefit
to individual : loss income, lass skill, luss self- esteem (), social cost (family-break-ups, health problem, crime ....)
Trade unions = purpose is improve working conditions and pay for their members, but also increase employer casts which may reduce employment
Efficiency wages =efficiency wages increase the labour supply, so may increase unemployment ( con), but it provide motivation for more productive work ( pro)
LA higher- than- market wage paid by a firm to increase worker productivity > reduce the need for worker monitoring ( pro for firm
Types of unemployment : @ cyclical unemployment ( caused by a business cycle contraction) (: solest demand of workert)
(S Frictional unemployment ( Short-term unemployment .: matching workers with jobs) ( people re-entering the market ( school leavers / new workers)
3 Seasonal unemployment (:" wealth, variation in tourism and other calender- related events)
@Structural unemployment ( New technology and changes in consumer tastes => some workers redundant unemployment)
Full employment ino cyclical unemployment but frictional unemployment & structural unemployment still exist .
Consumer price index ( CPI) : measure quarterly, rate of change in the prices of the goods and services in the market basket
CPI = expenditures in current year expenditures in base year Inflation rate = (CPI in this year - CPI in last year) CPI in last year
Inflation; CPI used to measure inflation, reasons lead to it overstating ( isk ) the inflation rate,
LU Substitution ( #At) bias( #E)Increase in equality bias 3 New product bias cutlet bias
is = current value
(CPI in current year
Producer price index ( PPI ) = average price received in current year & average price received in base year
= base value ? (CPI in base year !
Real interest rate = Nominal interest - inflation rate
Effect of inflation = people on fixed income reduced expenditure, paper money value decrease, changing the cost price to firm, income tax increase,
increase tax who own generating assets.
Effect of deflation = debt burdens increase, reduces asets value and wealth but increase paper money value, wages decrease, price level decrease,
reduce loan supply, reduce effect of monetary policy ,, long-term deflation can serverly erode economic growth.
Cause ofinflation ;(AEA, In full employment ) Demand- pull inflation, (ASP, import prices, wages?, indirect taxation, monopoly power
in product markets ', have natural disasters ) cost- puch inflation
Inflation rate = growth rate of money supply I growth rate of velocity - economic growth rate ( growth rate of GDP) political turmoil
Hyperinflation (#1/ $ 214): effect: firms & householders try to avoid holding money, usually accompanied by a servere recession and economic and
Lolcause)= Bank increasing money supply >economic growth rate
( Government in some developing country force their central banks to buy their bonds to cover the fund budget
deficits as they are differiculty in selling bonds to the public .
nditure ( AE] = Consumption (c) + Planned investment (I) + Government Purchases (G) + Net export (NX)...
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