Section 2: ● Economic Growth and Zero-sum - Zero Sum : one person’s gain comes as a loss for another person (ex: Poker) -Americans would do better with smaller shares of a rapidly growing economy, than with the large shares, they now possess, of an economy that’s barely moving. ● Human Health and Economic Growth: - Long Run economic growth increases living standards -Best measure of living standards is real GDP per person -HIV/ aids slows economic growth -Good health is linked to economic growth, poor health undermines growth ● Economic Growth and Changed Lives -Real GDP per capita has grown from $5,600 in 1900 to $42,349 in 2010 -Today, the average American purchases 8X more than in 1900 -Caused by an increase in labor productivity (output per worker), determined by 2 factors: 1. Quantity of capital per hour worked 2. Level of Technology ● Growth Rates (Rule of 70): Real GDP Growth Rate= [(Real GDP t – Real GDP t-1 ) / (Real GDP t-1 )] X 100 Rule of 70: a way to estimate the # of years it takes a certain variable to double = (70/ Growth Rate) ● Small Differences in Growth Rates:
●Why are some countries poor, and others rich?
-prices provide signals and incentives Government: -provides a Rule of Law -Corrects market failures and externalities (ex: pollution, education, patents) -Prevents market manipulation (ex: antitrust regulation, flexible prices) -Promotes markets (ex: globalization) More Broadly: Political Stability, Press Freedom, Little Corruption *If properly done, institutions will allow markets to flourish * ● Rising Productivity, Falling Employment- Essential for Growth -greater productivity in an industry leads to higher real wages and many layoffs -New industries are born that employ those laid off -So, layoffs are often considered a good thing for long run economic growth Section 3: ● Unemployment: measures of unemployment come from 2 surveys Current Population Survey
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