Chapter 7 mankiw notes

Chapter 7 mankiw notes - Chapter 7 -Long-Run Economic...

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Unformatted text preview: Chapter 7 -Long-Run Economic Growth (Sustained upward trend in aggregate output over several decades.) Motivation: A ty p ic a l fa m ily w ith a ll th e ir p o s s e s s io n s in th e U .K ., a n a d v a n c e d e c o n o m y A ty p ic a l fa m ily w ith a ll th e ir p o s s e s s io n s in th e U .K ., a n a d v a n c e d e c o n o m y G D P p e r c a p ita : $ L ife e x p e c ta n c y : y e a r s A d u lt lite r a c y : % G D P p e r c a p ita : $ L ife e x p e c ta n c y : y e a r s A d u lt lite r a c y : % A t y p i c a l f a m i l y w i t h a l l t h e i r p o s s e s s i o n s i n M e x i c o , a m i d d l e i n c o m e c o u n t r y A t y p i c a l f a m i l y w i t h a l l t h e i r p o s s e s s i o n s i n M e x i c o , a m i d d l e i n c o m e c o u n t r y G D P p e r c a p ita : $ L ife e x p e c ta n c y : y e a r s A d u lt lite r a c y : % G D P p e r c a p ita : $ L ife e x p e c ta n c y : y e a r s A d u lt lite r a c y : % A t y p i c a l f a m i l y w i t h a l l t h e i r p o s s e s s i o n s i n M a l i , a p o o r c o u n t r y A t y p i c a l f a m i l y w i t h a l l t h e i r p o s s e s s i o n s i n M a l i , a p o o r c o u n t r y G D P p e r c a p it a : $ L if e e x p e c t a n c y : y e a r s A d u lt lit e r a c y : % G D P p e r c a p it a : $ L if e e x p e c t a n c y : y e a r s A d u lt lit e r a c y : % GDP per capita, 2005 Growth rate, 1960-2005 China $6,572 5.8% Singapore 29,921 5.4% Japan 30,821 3.8% Spain 26,125 3.2% India 3,486 2.7% Israel 25,670 2.7% United States 41,854 2.2% Canada 32,886 2.1% Colombia 7,769 1.8% New Zealand 22,511 1.4% Philippines 4,920 1.4% Argentina 14,421 1.0% Saudi Arabia 14,729 0.8% Rwanda 1,333 0.3% Haiti 1,836 1.2% PRODUCTION AND GROWTH 9 Pro d u ctiv ity Recall one of the Ten Principles from Chap. 1: A countrys standard of living depends on its ability to_____________. This ability depends on _____________, the average quantity of g&s produced per unit of labor input. Y = real GDP = quantity of output produced L = quantity of labor so productivity = Y / L (output per worker) PRODUCTION AND GROWTH 16 The Production Function The production function is a graph or equation showing the relation between output and inputs: Y = A F ( L , K , H , N ) F ( ) a function that shows how inputs are combined to produce output A the level of technology A multiplies the function F ( ), so improvements in technology (increases in A ) allow more output ( Y ) to be produced from any given combination of inputs. Since changes in labor generally move with changes in population we often just look at change in productivity where productivity is just output per workers To examine what factors affect Productivity just divide everything by L. PRODUCTION AND GROWTH 18 Productivity is a function of Y / L = A F (1, K / L , H / L , N / L ) This equation shows that productivity (output per worker) depends on: the level of technology (...
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Chapter 7 mankiw notes - Chapter 7 -Long-Run Economic...

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