Chapter 9 Summary

Chapter 9 Summary - Chapter 9 Summary Growth is measured as...

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Chapter 9 Summary - Growth is measured as changes in real GDP per capita in order to eliminate the effects of changes in the price level and changes in population size. Levels of real GDP per capita vary greatly around the world: more than half of the world’s population lives in countries that are still poorer than the United States was in 1907. Over the course of the 20 th century, real GDP per capita in the United States increased fivefold. - Growth rates of real GDP per capita also vary widely. According to the Rule of 70, the number of years it takes for real GDP per capita to double is equal to 70 divided by the annual growth rate of real GDP per capita. - The key to long-run economic growth is rising labor productivity, or just productivity, which is output per worker. Increases in productivity arise from increases in physical capital per worker and human capital per worker as well as advantages in technology. The aggregate production function shows how real GDP per worker depends on these three factors. Other things equal, there are diminishing returns to physical capital: holding human capital per worker and technology fixed, each successive addition to
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