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CHAPTER 7 - CHAPTER 7 Production and Growth Economic growth...

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CHAPTER 7 – Production and Growth Economic growth around the world - Real Income per person greatly differs around the world - Most undeveloped countries of GDP/per persons that have not been seen in developed countries for hundreds of years o The real income of a Pakistani in 2003 was almost the same as a Canadian’s real income 130 years ago. - Growth rate measures how rapidly real GDP per person grew in the typical year. - A growth rate represents an average numerical value depicting how rapidly a country has grown over the years. Productivity: Its role and determinants - In order to determine why some countries are so much richer than compared to others, we must look at the factors that determine a nations productivity. Why productivity is important - In a simple, one-man economy, Rob’s activities include: Catching his own fish, growing his own veggies, and making his own clothes - If rob’s good at all these things, his economy will be productive. - Productivity: The amount of goods and services produced from each hour of a worker’s time. - If he finds a better spot with more fish productivity rises. The increase in productivity makes him better off. - “An economy’s input is an economy’s output” - A nation can enjoy a higher standard of living only if it can produce a large quantity of goods and services. How productivity is determined - Physical capital per worker o Physical capital: The stock of equipment and structures that are used to produce goods and services
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o More tools = higher productivity o Capital is a factor of production used to produce all kinds of goods and services, including more capital. - Human capital per worker o Human capital: The knowledge and skills that workers acquire through education, training and experience, ie: high school, college, university etc o Human capital, much like phys. Cap. Raises a nations ability to produce goods and services, o Also, Hum. Cap. Is a produced factor of production. Producing human cap requires inputs from teachers, librarians etc.
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