Ch08-8e_macroya

Ch08-8e_macroya - CHAPTER 8 Economic Growth After studying...

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Economic Growth CHAPTER 8
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2 After studying this chapter you will be able to Define and calculate the economic growth rate and explain the implications of sustained growth Describe the economic growth trends in the United States and other countries and regions Identify the main sources of economic growth Explain how we measure the effects of the sources of economic growth and identify why growth rates fluctuate Explain the main theories of economic growth
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Transforming People’s Lives Real GDP per person in the United States almost tripled between 1960 and 2005. What causes the growth in production, income, and living standards? Elsewhere, notably in China and other parts of Asia, growth is even faster; and technology 2,000 years old coexists with the most modern. Why are incomes in Asia growing so fast?
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The Basics of Economic Growth Economic growth is the sustained expansion of production possibilities measured as the increase in real GDP over a given period. Calculating Growth Rates The economic growth rate is the annual percentage change of real GDP. The economic growth rate tells us how rapidly the total economy is expanding.
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The Basics of Economic Growth The standard of living depends on real GDP per person. Real GDP per person is real GDP divided by the population. Real GDP per person grows only if real GDP grows faster than the population grows.
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The Basics of Economic Growth The Magic of Sustained Growth The Rule of 70 states that the number of years it takes for the level of a variable to double is approximately 70 divided by the annual percentage growth rate of the variable.
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The Basics of Economic Growth Applying the Rule of 70 Figure 8.1 show the doubling time for growth rates. A variable that grows at 2 percent a year doubles in 35 years. A variable that grows at 7 percent a year doubles in 10 years.
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Economic Growth Trends Growth in the U.S. Economy From 1905 to 2005, growth in real GDP per person in the United States averaged 2 percent a year. Real GDP per person fell precipitously during the Great Depression and rose rapidly during World War II. The growth rate was greater after World War II than it was before the Great Depression. Figure 8.2 on the next slide illustrates.
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Economic Growth Trends
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Economic Growth Trends Real GDP Growth in the World Economy Figure 8.3(a) shows the growth in the rich countries. Japan grew rapidly in the 1960s, slower in the 1980s, and even slower in the 1990s. Growth in Europe Big 4, Canada, and the United States has been similar.
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Economic Growth Trends Figure 8.3(b) shows the growth of real GDP per person in group of poor countries. The gaps between real GDP per person in the United States and in these countries have widened.
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Economic Growth Trends Figure 8.4 shows growth in Asian economies. China is growing very
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Ch08-8e_macroya - CHAPTER 8 Economic Growth After studying...

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