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Principles of Economics- Mankiw (5th) 532

Principles of Economics- Mankiw (5th) 532 - 550 PA R T N I...

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550 PART NINE THE REAL ECONOMY IN THE LONG RUN Economic prosperity, as measured by GDP per person, varies substantially around the world. The average income in the world’s richest countries is more than ten times that in the world’s poorest countries. Because growth rates of real GDP also vary substantially, the relative positions of countries can change dramatically over time. The standard of living in an economy depends on the economy’s ability to produce goods and services. Productivity, in turn, depends on the amounts of physical capital, human capital, natural resources, and technological knowledge available to workers. Government policies can influence the economy’s growth rate in many ways: encouraging saving and investment, encouraging investment from abroad, fostering education, maintaining property rights and political stability, allowing free trade, controlling population growth, and promoting the research and development of new technologies.
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