ECO3041 - Ch 15 Economic Growth

ECO3041 Ch 15 - Chapter 15 Notes Economic Growth FIU Department of Economics Rafael Dacal Chapter 15 Notes I The Nature of Growth Short-Run Changes

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 15 Notes Economic Growth FIU Department of Economics Rafael Dacal
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 15 Notes I. The Nature of Growth Short-Run Changes in Capacity Use The easiest kind of growth comes form increased use of our productive capabilities. We have illustrated the short-run limits to output with a production function. You can increase the production only if you are a point inside the PPF. The way we achieve this in the SR is by increasing employment to full-employment productivity. (In the short run all you can do is hire or fire). Long-Run Changes in Capacity To increase output further we must expand the capacity. To do so we have to shift the production possibility frontier – this implies an increase in potential GDP. To achieve large and lasting increase in output we must push our PPF outward. o Increase labor – (increase the birth rate) o Increase productivity – (technological advance) Economic growth is an increase in output (i.e. and expansion of PPF). Aggregate Supply Focus AS we have observe, the AS curve set limits to the demand side policy. The slope of the AS curve determine how much inflation we have to pay to obtain more output. In LR the position of AS curve limits total output. To get more output in the long run, we have to shift the LR-AS. 2
Background image of page 2
Chapter 15 Notes Nominal vs. Real GDP When thinking of economic growth we look only at real GDP Real GDP refers to the actual quantity of goods and services produced Real GDP avoids the distortions of inflation by valuing output in constant prices. II. Growth Index The Growth Rate Growth rate is the percentage change in real GDP from one period to another Growth Rate = GDP period base GDP real , think 100 × - Old Old New The challenge for developed countries is to maintain a sustainable growth rate throughout
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/22/2012 for the course ECO 3041 taught by Professor Dacal during the Fall '11 term at FIU.

Page1 / 7

ECO3041 Ch 15 - Chapter 15 Notes Economic Growth FIU Department of Economics Rafael Dacal Chapter 15 Notes I The Nature of Growth Short-Run Changes

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online