An example will help to illustrate the level vs. rate distinction. Let's use the idea of capital presented in the preceding section. Say a company owns 50 riveting tools like the one used by Joe. In order to increase output, the company decides to purchase 5 new riveting tools next year. In this case, the level of capital is 50 because this is the amount that the firm began with. The growth rate of capital is 10% because from one year to the next the amount of capital used by Joe's firm increased by 10%. Changes in growth rate vs. changes in the growth level over time Now that the growth rate vs. growth level distinction is clear, let's apply it to the way that economic policies affect productivity. The most important number in increasing economic productivity is the growth level. The growth level shows where the economy is relative to long term positioning. For instance, we know that the economy tends to grow
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