The most important human invention is capitalism

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The most important human invention is capitalism, markets, property, and rights There has been tremendous technology development since 1750s in Great Britain and it spread around the world Be able to explain the relationship between human health and economic growth. (Ch. 10.1) o Dramatic increases in life expectancies where there has been economic growth o Many economists believe there is a link between health and economic growth Be able to explain how long run economic growth has dramatically changed life and how novel the last two centuries have been. (Ch. 10.1 and notes) o Increases in real GDP per capita depend on increases in labor productivity. o Labor Productivity, the quantity of goods and services that can be produced by one worker or by one hour of work o In analyzing long run growth, economists usually measure labor productivity as output per hour of work to avoid the effects of fluctuations in the length of the workday and in the fraction of population employed. o Two key factors determine labor productivity : quantity of capital per hour worked and the level of technology Be able to calculate growth rates and doubling times with the Rule of 70. (Ch. 10.1 and notes) o G= (final value / initial value) ^1/(years between) - 1 o **Reminder: multiply by 100 if you want percent. o Both inflation and economic growth are computed by Percentage change
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o G= average annual growth rate of anything o Rule of 70: an easy to use approximation for the approximate # years something takes to double in size: Years ~ 70/(growth rate) Be able to explain why small differences in growth rates matter dramatically over long periods. (Ch. 11.1 and notes) o Small changes in growth rates matter dramatically because they make huge differences in the standard of living o Small annual growth rates have a big impact over many years o Small differences in growth rates can have a large effect o Compounding, magnifies even small differences in interest rates over long periods of time o Compounding applies to economic growth rates as well as interest rates o In the long run, small differences in economic growth rates result in big differences in living standards. Be able to explain how GDP per person is determined by the percent of the population that works and labor productivity (i.e. Y/pop = (L/pop)•(Y/L)) (notes) o Y : real GDP (real production or income) o L : number of workers in a country’s economy (labor) o **Y/L : labor productivity – how much the average worker produces in a year o Pop : population of a country o **Y/Pop : GDP per person o L/Pop : percent population with jobs o (Y/Pop) = (L/Pop) • (Y/L)
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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) o TFP measures technology– human capital, better capital, and better organized firms o Y/L=A•(K/L)^.3 o A = total factor productivity o Graph becomes flatter and flatter o Y/L is the dependent variable – per worker production function explains
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Christopher Reinemann
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