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CH 9 and 17

CH 9 and 17 - CH 9 and 17 Chapter 9-How can you push the...

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CH 9 and 17 Chapter 9 -How can you push the PPF to the right as much as possible? -Malthus theory (1800’s) : the output of the economy increases by an imperceptible amount. The population was increasing by twice the amount of the growth of the GDP. He was hostile to working class people because he said they had too many kids and not enough money to support them. Have the intelligencia convince the lower class to have fewer kids. He stated that there needs to be some kind of catastrophe to cut population. He states the demographics dictate standard of living. -However, this theory was broken in the 1900’s due to innovations. Output increases dramatically in these times (Industrial Revolution), and people have fewer kids. Gary Baker: more expensive to have children nowadays. The opportunity cost has skyrocketed from the 1800’s to have children. -implicit cost: time, work (mother mostly) The rule of seventy: if you take seventy and divide this number by the GDP per capita it will tell you how long it will take the standard of living in the country to double. -China’s standard of living doubles every seven years. If you go back to 1970, the South Korean GDP was half of the Mexican. Now, it is over double the Mexican. -When you are calculating at standard of living you look at the per capita GDP. Theory of Economic Growth: GDP/ Population= (Population X Employment Participation Rate (EPR) X Avg. Hours (Majority of the time a negative number) X Productivity) / Population According to the rule of seventy: the US doubles its standard of living every 35 years. Increase (Shift) in Labor Supply -The Real wages have increased in the whole century, yet in the last thirty years they were stagnant.
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Government Policies for increasing GDP Increase Supply of Labor (EPR )= - Lower income taxes (more people will work) - Restructure the welfare system - Increase retirement age Increase Demand of Labor = Increase funds for education/training for workers (important for the Structurally unemployed) Increase Labor Productivity = -Reduce corporate taxes/ tax credits increase capital stock through investment -(Loopholes and reductions in taxes make the corporate tax low and a miniscule amount of total US taxes) -Boost level of savings investment goes up b/c interest rates go down -Reduce capital gains taxes (Making profits out of the sale of assets) -Government and businesses facilitate innovation through organizing scientist and money for research. -Eliminate/decrease income taxes/taxes in general -Government gives money to universities for research. For Increasing Capital: -Law of Diminishing Returns : If you have a factory and you have ten machines and ten workers. If the manager keeps hiring workers, but do not get more machines, there will be crowding, and output will decrease. -You have to keep adding capital
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CH 9 and 17 - CH 9 and 17 Chapter 9-How can you push the...

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