439 17  Long-Run Growth Chapter objectives:1. Define economic growth and identify the sources of economic growth. 2. Explain the information presented by an aggregate production function. Describe the circumstances that cause diminishing returns and relate this concept to the work of Malthus and Ricardo. 3. List the four factors that affect growth. 4. Outline the strategies proposed to increase the growth rate. 5. Summarize the relationship between economic growth and environmental quality. BRAIN TEASER:How can growth occur in a “Robinson Crusoe” type of economy? Does the arrival of Friday represent economic growth? Compare and contrast economic growth in primitive economies with growth in developed economies. OBJECTIVE 1: Define economic growth and identify the sources of economic growth. Economic growthis an increase in real per capita GDP resulting in improved standards of living. This chapter is concerned with what causes the upward trend. Production is limited by the resources and technology that the economy possesses. Growth occurs when more resources become available or when current resources are used more efficiently. In terms of the production possibility frontier, the maximum levels of production shift to the right as the resource base expands and/or technology improves. (page 319 ) Growth can take place in two ways: either the economy discovers new resources or it uses its given resources more efficiently. Growth occurs, then, through: (a) An increase in resources (i)Labor supply (ii)Physical capital (iii)Human capital
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