When discussing growth

When discussing growth -...

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When discussing growth, there is an important distinction that must be made. The  growth level is the starting value of whatever is growing; the growth rate is the change in  the growth level from year to year. These distinctions allow for accurate descriptions of  economic policies on long-run growth.  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 
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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