lectur1-page4 - growth Productivity is measured as economic...

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The graph above illustrates real gross domestic product growth from 1990 to 2007. Think of real GDP growth as one of the “vital signs” of the economy. Think about when you visit a doctor’s office. Once you get into an examination room, a nurse usually takes your temperature, checks your heart rate and blood pressure. These are your vital signs. Well, economist use real GDP growth as one of the “vital signs” to monitor the health of the economy. The dip in real gross domestic growth b l i di h 1990 91 i h d f ll i h fi G lf below zero indicates the 1990-91 recession that occurred following the first Gulf War. A recession is defined as two consecutive quarters of negative growth in real gross domestic product. Since the 1990-91 recession, real growth has been above 2.5% for most of the decade long economic expansion from 1991 to 2001. From March 2001 to November 2001, the U.S. experienced a recession as determined by the NBER (National Bureau of Economic Research). The “sustainable” growth rate is derived from two factors, the U.S. growth in population and U.S. productivity
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Unformatted text preview: growth. Productivity is measured as economic output per hour of labor. Historically, population growth has been averaging 1.0% and growth in productivity has averaged 1.5% per year. The sum of these two measurers provides the “sustainable” growth rate for the economy. But, during the 90’s computer technology had become more integrated into the economy and has enhanced productivity growth. For the 90’s productivity growth averaged well above the 1 5% historical benchmark and has allo ed the econom to gro at faster rates 4 1.5% historical benchmark and has allowed the economy to grow at faster rates without major trouble from inflation. So, many economists believed that the economy during the 90’s could have grown faster than the previously believed 2.5% without inflation worries. But, the question is, how long will the economy enjoy these larger than historically normal increases in annual productivity?...
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