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Unformatted text preview: CHAPTER 6 • Productivity is the ratio of a specific measure of total output to a specific measure of input • Ex: Labor Productivity is the output per unit of labor and measures total output di- vided by the hours of labor employed to produce that output • Per-worker production function is the relationship between the amount of capital per worker and the output per worker • Curve slopes upward from left to right because an increase in capital per worker helps each worker produce more output • The curve starts to flatten out because at some point, more capital per worker no longer helps the output • Ingredients Of Economic Growth • Capital Deepening is an increase in the amount of capital per worker and is one source of rising productivity • Can be described as an increase in quantity of capital per worker • Technological Change causes in increase in economic growth by increasing the slope of the per-worker production function • Can be described as an increase in quality of capital per worker • Rules Of The Game are the formal and informal institutions that promote econom- ic activity • The laws, customs, manners, conventions, and other institutional elements that encourage people to undertake productivity • Economic growth is represented by an outward shift of the PPF • Economic growth requires investments, and investments cannot occur without sav- ing CHAPTER 7 • Gross Domestic Product (GDP) measures the market value of all final goods pro- duced during a year by resources within the United States, regardless of who owns the resource • Expenditure Approach is a way of measuring GDP which requires adding up spend- ing on all final goods and services produced during the year • GDP = Consumption + Investments + Government Purchases (Exports - Imports) • Value Added Approach adds up the selling price of a product at each stage of pro- duction minus the cost of intermediate goods purchased from other firms • GDP = sum of value added at every establishment • Value Added by a particular producer = (Sales Revenue) - (Cost of Goods Pur- chased From Other Firms) • Income Approach is a way of measuring GDP which requires adding up earnings during the year by those who produce all that output • GDP = Disposable Income + Net Taxes • GDP = Wages + Interest + Rent + Profit • Aggregate Expenditure = GDP = Aggregate Income = Disposable Income + Net Taxes • Disposable Income is the income households have available to spend or save after paying taxes and receiving transfer payments • Nominal GDP is GDP based on prices prevailing at the time of production • Real GDP is the dollar value of GDP in a particular year measured in base-year prices • Real Wage is a particular wage measured in terms of the quantity of goods and ser- vices it can buy • Real Interest Rate is the difference of the nominal interest rate and the inflation rate...
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This note was uploaded on 03/28/2012 for the course ECONS 102 taught by Professor Kuzyk during the Fall '08 term at Washington State University .
- Fall '08