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Chapter_25 - Chapter25Chapter25 ProductionandGrowth...

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Chapter 25Chapter 25 Production and Growth WHAT’S NEW IN THE THIRD EDITION: The section on population growth has been rewritten and now contains material on Malthus and Kremer’s  study of the relationship between population growth and technological progress.  The  Case Study  on “The  Productivity Slowdown” has been updated and is now called “The Productivity Slowdown and Speedup.”  There is a new  FYI  box on “Are You Richer than the Richest American?” and a new  In the News  box on  “Promoting Human Capital.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: how much economic growth differs around the world. why productivity is the key determinant of a country’s standard of living. the factors that determine a country’s productivity. how a country’s policies influence its productivity growth. CONTEXT AND PURPOSE: Chapter 12 is the first chapter in a four-chapter sequence on the production of output in the long run.  Chapter 12 addresses the determinants of the level and growth rate of output.  We find that capital and  labor are among the primary determinants of output. In Chapter 13, we address how saving and  investment in capital goods affect the production of output, and in Chapter 14, we learn about some of the  tools people and firms use when choosing capital projects in which to invest.  In Chapter 15, we address  the market for labor. The purpose of Chapter 12 is to examine the long-run determinants of both the level and the  growth rate of real GDP per person. Along the way, we will discover the factors that determine the  1
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 Chapter 25/Production and Growth productivity of workers and address what governments might do to improve the productivity of their  citizens.
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Chapter 25/Production and Growth   3 KEY POINTS: 1. 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. 2. 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.
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