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Principles of Economics- Mankiw (5th) 519

Principles of Economics- Mankiw (5th) 519 - CHAPTER 24...

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CHAPTER 24 PRODUCTION AND GROWTH 537 over time. But, in fact, the opposite is more nearly true. The prices of most nat- ural resources (adjusted for overall inflation) are stable or falling. It appears that our ability to conserve these resources is growing more rapidly than their sup- plies are dwindling. Market prices give no reason to believe that natural resources are a limit to economic growth. QUICK QUIZ: List and describe four determinants of a country’s productivity. ECONOMIC GROWTH AND PUBLIC POLICY So far, we have determined that a society’s standard of living depends on its abili- ty to produce goods and services and that its productivity depends on physical capital, human capital, natural resources, and technological knowledge. Let’s now turn to the question faced by policymakers around the world: What can govern- ment policy do to raise productivity and living standards? THE IMPORTANCE OF SAVING AND INVESTMENT Because capital is a produced factor of production, a society can change the amount of capital it has. If today the economy produces a large quantity of new
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