8 real gdp growth 22 population growth 1 real per

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 - Price growth (inflation) – 1.8%  = Real GDP growth – 2.2%  - Population growth – 1%  = Real per capita GDP growth = 1.2% = economic growth  o Example Start at $50,000 Growth rate = 2% Year 1 Income: $50,000 Income increase: $1,000 Year 2 Income: $51,000 Income increase: $1,020 Year 3 Income: $52,020 Income increase: $1,040.40
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Takes 35 years to get to $100,000 Doubled the standard of living  Rule of 70: With annual growth of x percent, the level of a variable doubles  every 70/x years o 1% annual growth rate, 70 years to double Value of $1.00 after 70 years = $2 o 2% annual growth rate, 35 years to double Value of $1.00 after 70 years = $4 58 years of Growth  Nicaragua o Growth Rate: 0.1% o Real GDP per capita (1950 and 2008): $2,476 and $2,565 El Salvador o Growth Rate: 1.2% o Real GDP per capita (1950 and 2008): $2,282 and $4,507 Mexico o Growth Rate: 2.1% o Real GDP per capita (1950 and 2008): $3,625 and $12,228 Malaysia o Growth rate: 3.3% o Real GDP per capita (1950 and 2008): $2,390 and $15,774 Japan o Growth rate: 4.4% o Real GDP per capita (1950 and 2008): $2,944 and $34,967 South Korea o Growth rate: 5.6%
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o Real GDP per capita (1950 and 2008): $1,309 and $30,061 Growth Theory intro Production function o Relationship between inputs and output (Y) o Why do some countries produce a lot of GDP and other countries do  not? Output = Y Y = F(inputs) Y = F(capital, labor, land) o Capital: Tools, equipment More capital you have the more you can produce, all else equal o Labor: Workers and their skills o Land: Natural resources Example: Chuck Noland – Cast Away o Output = coconuts Capital = ladders
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03/06/2013 14:24:00
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03/06/2013 14:24:00
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