chapter 18 why do economies grow

chapter 18 why do economies grow - CHAPTER 18 Why Do...

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CHAPTER 18 Why Do Economies Grow?
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                    Chapter Eighteen 2 of 40 Lecture Outline 1. Defining and measuring economic growth: growth rate of real GDP 2a. Comparing economic growth rates across the world 2b. Assessing the convergence of rich and poor countries 3. Capital deepening as a mechanism of economic growth a. Understanding the links between saving, investment and the stock of capital in an economy b. Factors affecting capital deepening c. Limits to capital deepening 4. Technological progress as a mechanism of economic growth a. Measurement of technological progress: growth accounting b. Causes of technological progress 5. The role of government in achieving economic growth 6. Human capital: what is it and what can be done to improve it FYR
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                    Chapter Eighteen 3 of 40 Economic Growth Economic growth is the expansion of the economy’s production possibilities – an outward-shifting PPF. We measure economic growth by the increase in real GDP.
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                    Chapter Eighteen 4 of 40
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                    Chapter Eighteen 5 of 40 Why Do Economies Grow? Two basic mechanisms that increase GDP per capita over the long term: 1. Capital deepening : an increase in the economy’s stock of capital—plant and equipment —relative to its workforce. 2. Technological progress : the ability to produce more output without using any more inputs— capital or labour. Human capital: the knowledge and skills acquired by a worker through education and experience and used to produce goods and services.
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                    Chapter Eighteen 6 of 40 Economic Growth Rates Real GDP per capita = real GDP per person = Real GDP ÷ Population Growth rate of GDP % G D P G D P i n y e a r 2 G D P i n y e a r 1 G D P i n y e a r 1 = - x 1 0 0 %
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                    Chapter Eighteen 7 of 40 Measuring Economic Growth If the economy started at 100 and grew at a rate g for n years, then real GDP after n years equals: G D P ( 1 0 0 ) Y E A R S L A T E R n g n = + ( ) 1 At 4% for the next ten years, GDP will be: G D P ( 1 0 0 ) = 1 4 8 1 0 Y E A R S L A T E R = + ( . ) 1 0 0 4 1 0
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                    Chapter Eighteen 8 of 40 To find out how many years it would take for GDP to double, we use the rule of 70: If an economy grows at x percent per year, output will double in 70/ x years. Y e a r s t o d o u b l e p e r c e n t a g e g r o w t h r a t e ) = 7 0 (
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                    Chapter Eighteen 9 of 40 Comparing the Growth Rates of Various Countries FYR
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                    Chapter Eighteen 10 of 40 Are Poor Countries  Catching Up?
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This note was uploaded on 02/12/2012 for the course ECON EC1101 taught by Professor Ms during the Spring '08 term at National University of Singapore.

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chapter 18 why do economies grow - CHAPTER 18 Why Do...

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