Econ- Chap 7 - x How Overview-7 economic growth differs...

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Principles of Macroeconomics: Ch 12 First Canadian Edition Overview-7 How economic growth differs around the world Why productivity is the key determinant of a country’s standard of living Factors that determine a country’s productivity How a country’s policies influence growth
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Principles of Macroeconomics: Ch 12 First Canadian Edition Production and Growth A country’s standard of living depends on its ability to produce goods and services. Within every country there are large changes in the standard of living over time.
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Principles of Macroeconomics: Ch 12 First Canadian Edition Economic Growth Around the World Living standards, as measured by per capita real GDP, vary significantly among nations. The most developed countries have real per capita GDP that is ten to twenty times that of the poorest countries. The process of creating a high living standard is keyed to productivity .
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Country Period Real GDP per Person at Beginning of Period Real GDP per person at End of Period Growth Rate (per year) Japan 1890-1990 $ 1,149 $ 22,036 3.00% Brazil 1900-1987 595 4,664 2.39 Canada 1870-1990 1,815 23,301 2.15 West Germany 1870-1990 1,669 19,503 2.07 United States 1870-1990 3,063 24,922 1.76 China 1900-1987 547 2,386 1.71 Mexico 1900-1987 886 3,640 1.64 United Kingdom 1870-1990 3,676 18,549 1.36 Argentina 1900-1987 1,753 4,507 1.09 Indonesia 1900-1987 681 1,638 1.01 Pakistan 1900-1987 564 1,208 .88 India 1900-1987 516 904 .65 Bangladesh 1900-1987 476 512 .08
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Principles of Macroeconomics: Ch 12 First Canadian Edition Productivity Recall one of the Ten Principles from Chapter 1: A country’s standard of living This ability depends on productivity : the average quantity of g&s produced per unit of labour input. y = real GDP = quantity of output produced L = quantity of labour so we can write productivity as y/ L (output per worker)
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Principles of Macroeconomics: Ch 12 First Canadian Edition The Rule of 70 Annual growth rates that seem small become large when compounded for many years. Compounding
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Econ- Chap 7 - x How Overview-7 economic growth differs...

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