Chapter 7 Productivity and Gains Oct 6 lecture

Chapter 7 Productivity and Gains Oct 6 lecture - 7-1Chapter...

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Unformatted text preview: 7-1Chapter 7: 1Economic GrowthoImagine a world with no fax machines, no cellular phones, no satellite TV and no digital soundoSuch a world actually existed – and only 30 years ago!oAt that time, personal computers were still on the drawing boardoLaptops weren’t even envisionedoWebsites were not createdoNo one popped microwave popcornoNew products are evidence of economic progress over timeoWe produce not only more goods but also new and better goods and servicesoIn the process we get richer and our material living standards riseoHowever, different economies grow at different ratesoIn China, India, South Asia and Pacific regions economic growth has lifted millions of people out of povertyoBut the World Bank estimates that in some other countries there are poorer groups where $1.1 billion people live on $1 a day or less and 2.7 billion people live in $2 a day or lessoThis chapter will study economic growth and the differences in growth rates around the world7-2Economic GrowthoThe term economic growth usually refers to the growth of one of three interrelated macroeconomic variablesoAggregate output/income (gdp)oGDP per capitaloProductivity: GDP produced from each hour (or year) or a worker’s timeoEconomists are most concerned about the growth rate of GDP per capita (a measure of a country’s average income level) and the growth rate of productivityoMeasured in constant 1992 dollars, Canadian GDP per capita increased from $9,400 in 1950 to $30, 250 in 2000; after correcting for the effects of inflation, average real income per capita more than tripled over the last half centurySee: www.csls.caoOn-line Availability of the Spring 2008 Issue of the International Productivity Monitor7-3The Rule of 7070goAccording to the rule of 70, if the same variable grows at a rate of g percent per year, then the variable doubles in approximately 70/g yearso“g” is the annual growth rateoIn a country such as Canada, average income as measured by real GDP per person has grown at about 2 percent per yearoExample: if a country grows at 5 percent per year according to the rule of 70 is will take 70/5 = 14 years for the variable to doubleoTreat 5 percent as a whole number as shown above when using the Rule of 707-47-5...
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This note was uploaded on 10/21/2010 for the course ECON 102 taught by Professor ? during the Fall '08 term at Waterloo.

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Chapter 7 Productivity and Gains Oct 6 lecture - 7-1Chapter...

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