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Be able to explain how to use the "per-worker production function" graph and the corresponding equation. (Ch. 11.2 and notes)Be able to explain the fundamental role of markets and institutions in economic growth. (Ch. 2.3, Ch. 11.5, and notes)
oMarketsgenerate incentives and signals to add capital and technologyCreative destruction: one industry or business replaces another in search of more profits oInstitutions– to be rich countries need a lot of technology, A, and K/L. To grow we need to increase:Good institutionsVibrant marketsHigh A and K/LHigh Y/LHigh GDP/person o**Markets work best in economies with good institutions** Be able to explain how rising productivity can lead to falling employment in a given industry yet is essential for long-run growth. (notes)oLayoffs are essential for growth and rising real incomes.oEmployment can increase with layoffs:1. More output by fewer workers in a firm – higher real wages2. New industries employ the laid off and many more; employment actually rises3. Labor saving technology – KEY to prosperity Be able to explain what the future might portend for economic growth in the U.S. (notes)oNegative trends:1. Slowing human capital formation2. Falling labor force participation rate Definition: (working & looking for a job / those aged 16 and up)
3. Rising inequalityModerated somewhat by falling household size and health and government benefits4. Innovation slowdownFor households after 19581900-1958: cars, phones, TV, airplanes, radio, plumbing, etc. Be able to explain the "key terms" in these sections and know how they relate to concepts and other key terms. (Note that some of these terms, particularly "capital" and "technology," don't carry their usual meanings.)Know the typical rates of economic growth and real per capita GDP for the countries that we've studied. (notes)°°Readings from the Macroeconomics Supplement"The Ultimate Global Antipoverty Program"oAccording to this article, what has happened to poverty around the world in recent years?