chapter 9-10 - CHAPTER9:ECONOMICGROWTH,FINANCIALSYSTEMAND...

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CHAPTER 9: ECONOMIC GROWTH, FINANCIAL SYSTEM AND   BUSINESS CYCLES With supplements from CHAPTER 10: LONG RUN ECONOMIC GROWTH: SOURCES AND   POLICIES The best measure of comparing standard of living is real GDP per person or real GDP per capita. Calculating Growth Rates and the Rule of 70 The growth rate of real GDP or real GDP per capita during a particular year is equal to the percentage change from the previous year. Number of years to double = 70/ Growth rate What Determines the Rate of Long-Run Growth? 1) Increase in labor productivity . Two factors determine labor productivity: The quantity of capital per hour worked (physical and human capital) and the technological change. 2) Government Policies The per worker production function: (Graph with technology constant and with technology change) Solve 2.7, page 342 Why don’t Low-income countries experience rapid economic growth? 1) Failure to enforce rule of law: 2) Wars and Revolutions: 3) Poor Public Health and Education: 4) Low rates of Savings and Investment: 1
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