EC1301_-_Lecture_8_-_Why_Do_Economies_Grow

EC1301_-_Lecture_8_-_Why_Do_Economies_Grow - EC1301 Why Do...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
1 EC1301 Why Do Economies Grow? © Connie CHUNG  LECTURE 8  Section 2 WHY DO ECONOMIES GROW?
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 EC1301 Why Do Economies Grow? © Connie CHUNG  Agenda Why Do Economies Grow? Measuring Economic Growth  Capital Deepening  Technological Progress Saving and Investments Human Capital  
Background image of page 2
3 EC1301 Why Do Economies Grow? © Connie CHUNG  Objectives 1. Understand how economic growth is  measured 2. Examine the mechanisms of economic  growth 3. Examine how population growth,  government and trade affect capital  deepening 4. Understand what causes technological  progress 
Background image of page 3

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

View Full DocumentRight Arrow Icon
4 EC1301 Why Do Economies Grow? © Connie CHUNG  Key Terms capital deepening growth rate real GDP per capita convergence human capital  rule of 70 creative destruction  labor productivity saving  growth accounting   new growth theory technological progress 
Background image of page 4
5 EC1301 Why Do Economies Grow? © Connie CHUNG  Why Do Economies Grow? Economists believe that there are 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 labor The role of education and investment in human  beings  in fostering economic development is  called  human capital
Background image of page 5

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

View Full DocumentRight Arrow Icon
6 EC1301 Why Do Economies Grow? © Connie CHUNG  FIGURE 8.1 What Is Economic  Growth? Economic growth  means an  expanded  production  possibilities curve  (PPC) 
Background image of page 6
7 EC1301 Why Do Economies Grow? © Connie CHUNG  Measuring Economic Growth A meaningful measure of the standard of living  in a given country is  real  GDP per capita , or  real GDP per person Usual measure of living standards across time and between countries   Real GDP per capita typically grows over time The  growth rate  of a variable is the percentage change in that variable from  one period to another GDP growth rate       = [(104 – 100)/100] * 100       = 4%       ie. real GDP grew by 4% from year 1 to year 2 
Background image of page 7

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

View Full DocumentRight Arrow Icon
8 EC1301 Why Do Economies Grow? © Connie CHUNG  Measuring Economic Growth If the economy started at  100 and grew at a rate  g   for  years, then  real  GDP after  n  years   equals: At 4% for the next ten  years, GDP will be: ie. nearly 50% higher  than in the first year    G D P ( 1 0 0 ) Y E A R S L A T E R n g n = + ( ) 1 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
Background image of page 8
9 EC1301 Why Do Economies Grow? © Connie CHUNG 
Background image of page 9

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

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 34

EC1301_-_Lecture_8_-_Why_Do_Economies_Grow - EC1301 Why Do...

This preview shows document pages 1 - 10. Sign up to view the full document.

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