Chapter 12 PowerPoint - Chapter 12 Production and Growth...

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1 CHAPTER 12 PRODUCTION AND GROWTH Chapter 12. Production and Growth Chapter 12. Production and Growth MACROECONOMICS P R I N C I P L E S O F F O U R T H E D I T I O N
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2 CHAPTER 12 PRODUCTION AND GROWTH In this chapter, look for the answers to these questions: What are the facts about living standards and growth rates around the world? Why does productivity matter for living standards? What determines productivity and its growth rate? How can public policy affect growth and living standards?
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A typical family with all their possessions in the U.K., an advanced economy Real GDP per capita: $30,800 Life expectancy: 78 years Adult literacy: 99%
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A typical family with all their possessions in Mali, a poor country Real GDP per capita: $1,000 Life expectancy: 41 years Adult literacy: 46%
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GDP per capita, 2004 Growth rate, 1960-2004 China $5,495 5.6% Singapore 27,273 5.4% Japan 29,539 3.9% Spain 25,341 3.2% Israel 24,082 2.6% India 3,115 2.5% United States 39,618 2.2% Canada 31,129 2.1% Colombia 7,121 1.8% New Zealand 22,912 1.4% Philippines 4,558 1.3% Argentina 12,723 0.8% Saudi Arabia 14,022 0.8% Rwanda 1,326 0.2% Haiti 1,685 –1.3% Incomes  and Growth  Around the  World FACT 1: There are vast differences in living standards around the world.
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GDP per capita, 2004 Growth rate, 1960-2004 China $5,495 5.6% Singapore 27,273 5.4% Japan 29,539 3.9% Spain 25,341 3.2% Israel 24,082 2.6% India 3,115 2.5% United States 39,618 2.2% Canada 31,129 2.1% Colombia 7,121 1.8% New Zealand 22,912 1.4% Philippines 4,558 1.3% Argentina 12,723 0.8% Saudi Arabia 14,022 0.8% Rwanda 1,326 0.2% Haiti 1,685 –1.3% Incomes  and Growth  Around the  World FACT 2: There is also great variation in growth rates across countries.
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7 CHAPTER 12 PRODUCTION AND GROWTH Incomes and Growth Around the World Since growth rates vary, the country rankings can change over time: Poor countries are not necessarily doomed to poverty forever – e.g. , Singapore, incomes were low in 1960 and are quite high now. Rich countries can’t take their status for granted: They may be overtaken by poorer but faster-growing countries.
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8 CHAPTER 12 PRODUCTION AND GROWTH Incomes and Growth Around the World Questions: Why are some countries richer than others? Why do some countries grow quickly while others seem stuck in a poverty trap? What policies may help raise growth rates and long-run living standards?
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9 CHAPTER 12 PRODUCTION AND GROWTH Productivity Recall one of the Ten Principles from Chapter 1: A country’s standard of living depends on its ability to produce g & s. This ability depends on productivity : the average quantity of g&s produced per unit of labor input. Y = real GDP = quantity of output produced L = quantity of labor so we can write productivity as Y / L (output per worker)
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10 CHAPTER 12 PRODUCTION AND GROWTH Why Productivity Is So Important When a nation’s workers are very productive, real GDP is large and incomes are high. When productivity grows rapidly, so do living standards.
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