7 Production and Growth

7 Production and Growth - Production and Growth A country's...

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Production and Growth A country’s standard of living depends on its ability to produce goods and services. Within a country there are large changes in the standard of living over time. In the United States over the past century, average income as measured by real GDP per person has grown by about 2 percent per year. Productivity refers to the amount of goods and services produced from each unit of labor input. A nation’s standard of living is determined largely by the productivity of its workers. 1. Refer to the table above. From 1870 to 2003 in the United States, average income as measured by real GDP per person has grown _______ percent per year, which implies a doubling about every _______ years. 2. Refer to the table above. From 1900 to 2003 in Pakistan, average income as measured by real GDP per person has grown _______ percent per year, which implies a doubling about every _______ years. ECONOMIC GROWTH AROUND THE WORLD Living standards, as measured by real GDP per person, vary significantly among nations. The poorest countries have average levels of income that have not been seen in the United States for many decades. Annual growth rates that seem small become large when compounded for many years. Compounding refers to the accumulation of a growth rate over a period of time. 3. If one wants to know how the material well-being of the average person has changed over time in a given country, one should look at the a. level of real GDP. b. growth rate of nominal GDP. c. growth rate of real GDP. d. growth rate of real GDP per person. 1
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Productivity: Its Role and Determinants Why Productivity Is So Important Productivity plays a key role in determining living standards for all nations in the world. To understand the large differences in living standards across countries, we must focus on the production of goods and services. How Productivity Is Determined The inputs used to produce goods and services are called the factors of production. The factors of production include: Physical capital Human capital Natural resources Technological knowledge The factors of production directly determine productivity. Physical capital per worker is the stock of equipment and structures that are used to produce goods and services. Physical capital includes: Tools used to build or repair automobiles. Tools used to build furniture. Office buildings, schools, etc. Physical capital is a produced factor of production. It is an input into the production process that in the past was an output from the production process. Human capital per worker is the economist’s term for the knowledge and skills that workers acquire through education, training, and experience.
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This note was uploaded on 07/22/2009 for the course ECON 203 taught by Professor Nelson during the Fall '08 term at Texas A&M.

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7 Production and Growth - Production and Growth A country's...

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