Chapter_9_Notes.docx

Chapter_9_Notes.docx - Chapter 9 Economic Growth, the...

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Chapter 9 Economic Growth, the Financial System, and Business Cycles Long Run Economic Growth A key measure of success of any economy is its ability to increase production of goods and services faster than the growth in population. o The U.S. economy has experienced periods of expanding production and employment followed by periods of recession, during which production and employment decline. The business cycle refers to alternating periods of economic expansion and economic recession. o The business cycle is not uniform: Each period of expansion is not the same length, nor is each period of recession. Most people in the United States, Western Europe, Japan, and other advanced countries expect that, over time, their standard of living will improve. Long-run economic growth -- the process by which rising productivity increases the average standard of living. The best measure of the standard of living is real GDP per capita . o Long-run economic growth is measured by increases in real GDP per capita. Growth Rate —the percentage change in real GDP per capita from one year to the next. The Rule of 70 Number of years to double = What Determines the Rate of Long Run Growth?
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Labor productivity is the quantity of goods and services that can be produced by one worker or by one hour of work. o Economists usually measure labor productivity as output per hour of work in order to avoid fluctuations in the length of the workday and in the fraction of the population employed. What Determines Labor Productivity? The quantity of capital per hour worked and the level of technology. Capital
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Chapter_9_Notes.docx - Chapter 9 Economic Growth, the...

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