development that can result in new tech Entrepreneurs are critical for

Development that can result in new tech entrepreneurs

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development that can result in new tech Entrepreneurs are critical for implementing technological change because they make crucial decisions about whether to introduce new tech to produce better or lower cost products Technological Change: Property Rights: Economic Growth (313-341; 349-379) Lesson 7 Page 46
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Additional requirement for economic growth is that the government must provide secure rights to private property The government can aid economic growth by establishing an independent court system that enforces contacts between private individuals Government has a role in facilitating the development of an efficient financial system Property Rights: Firms capacity is measured by its production when operating on normal hours using a normal workforce Potential GDP increases over time as the labor force grows, new factories and office buildings are built, new machinery and equipment are installed, and technological change takes place Potential GDP: level of RGDP attained when all firms are producing at capacity From 1949 to 2015 potential GDP in the US grew at an average annual rate of 3.2% Potential GDP: Process of economic growth depends on the ability of firms to expand their operations, buy additional equipment, train workers, and adopt new tech Profits that are reinvested in the firm rather than paid to the firm's owners Firms can finance this from retained earnings Financial system: the system of financial markers and financial intermediaries through which firms acquire funds from households 10.2: Saving, Investment and the Financial System: Channels funds from savers to borrowers and channels returns on the borrowed funds back to savers Overview of the Financial System: Financial markets: markets where financial securities, such as stocks and bonds are bought and sold Stocks: financial securities that represent partial ownership of a firm Bonds: financial securities that represent promises to repay a fixed amount funds A financial security is a document that states the terms under which funds pass from the buyer of the security to the sell Financial Markets: Financial intermediaries: such as banks, mutual funds, pension funds, and insurance companies act as go-betweens for borrowers and lenders Financial intermediaries: Risk: the chance that the value of a financial security will change relative to what you expect Liquidity: the ease with which a financial security can be exchanged for money Information: collection and communication of information or facts about borrowers and expectations about returns on financial securities Financial system provides 3 key services for savers and borrowers; risk sharing, liquidity, and information Risk Sharing, Liquidity, and Information: National income accounting refers to the methods the BEA uses to keep track of total production and total income in the economy The total value of saving in the economy must equal the total value of investment Y = C + I + G + NX
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