Topic 06 - Economic Growth (Thursday)

Topic 06 - Economic Growth (Thursday) - BUAD 350 Topic 06...

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BUAD 350 Topic 06 – Economic Growth
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Keywords Empirical Facts Growth Accounting Solow Model Solow Model with Technological Progress Policies to Promote Growth
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Comments China's unprecedented rise, fueled by foreign investment and technology, has put the Asian giant on a path to surpass the United States economically by 2025, the author of a new book on China said on Tuesday http://www.chinadaily.com.cn/english/doc/2005-2/09/content_416043.htm
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In 1961, Nikolai Khrushev, while speaking before the General Assembly of the United Nations, took off his shoe and pounded it on the podium, declaring "We will bury you." He meant that the Soviet Union would bury the West economically, since the USSR was growing so much faster than the western economies 1950-60: Growth 8% in the USSR against 2% in US Is it New?
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The Soviet Union achieved some of the highest growth rates in the world from the 1950s into the 1970s by investing heavily in "heavy industry" – steel production, oil production, coal production, and various other industries Is it New?
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Economic Growth Growth = Rise in real GDP per capita
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GDP per capita (in 2003) GDP per capita-Top 16 $0 $10 $20 $30 $40 $50 $60 Luxembourg Norway United States Bermuda Cayman Islands San Marino Switzerland Denmark Iceland Austria Canada Ireland Belgium Australia Hong Kong Netherlands Thousands
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GDP per capita (in 2003) GDP per capita in 2003 0 10 20 30 40 50 60 Luxembourg Norway United States Switzerland Canada Namibia Iran Romania Colombia Tunisia Malawi Gaza Strip Sierra Leone Somalia East Timor Thousands $600
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5000 10000 15000 20000 25000 1950 1960 1970 1980 1990 2000 Spain Portugal Greece Ireland US Dollars Real GPD per Capita
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GDP in 2003-Top 16 0 2 4 6 8 10 12 United States Japan Germany France Brazil Canada Spain Indonesia Trillions GDP (in 2003)
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Economic Growth Questions: 1. Can we grow “forever”? 2. Can we grow richer “forever”? 3. Where does growth come from? 4. What happens over time when labor, capital, and technology all change? This is the study of Economic Growth
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Roadmap To understand economic growth we need to understand: 1. The production function (tells us about GPD today) 2. The Solow model (tells us about GPD over time) We can use these tools to: 1. Understand the “engines” of growth in a given economy 2. Predict future growth rates 3. Design policies to impact growth
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Remember: Y is GDP Y = A F(K, L) K is physical capital (equipment, factories, machines, etc.) L is labor (total number of hours worked in an economy) A is called total factor productivity (TFP) How do these factors contribute to growth? Growth Accounting
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This note was uploaded on 02/15/2011 for the course BUAD 350 at USC.

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Topic 06 - Economic Growth (Thursday) - BUAD 350 Topic 06...

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