Chapter 7: Economic Growth

Productivity (p. 166)

How effectively inputs are converted into outputs. Labor productivity is the ratio of the output of goods and services to the labor hours devoted to the production of that output. Higher productivity and higher living standards are closely related.

Investment in Human capital (p. 167)

Investments such as education and on-the-job training that improve the productivity of human labor.

Capital-to-labor ratio (p. 167)

The capital employed per worker. A higher ratio means higher labor productivity and, as a result, higher wages.

Infrastructure (p. 171)

The public capital of a nation, including transportation networks, power-generating plants and transmission facilities, public education institutions, and other intangible resources such as protection of property rights and a stable monetary environment.

Economic Growth (p. 156)

Usually measured by the annual percentage change in real GDP, reflecting an annual improvement in the standard of living.

catch-up effect (p. 168)

countries with smaller starting levels of capital experience larger benefits from increased capital, allowing these countries to grow faster than countries with abundant capital.

production function (p. 165)

measures the output that is produced using various combinations of inputs and a fixed level of technology

Rule of 70 (p. 160)

provides an estimate of the number of years for a value to double, and is calculated as 70 divided by the annual growth rate

real GDP per capita (p. 159)

real GDP divided by population. provides a rough estimate of a country's standard of living

Compounding (p. 158)

the ability of growth to build on previous growth. it allows a value such as GDP to increase significantly over time as income increases on top of previous increases in income

total factor productivity (p. 170)

the portion of output produced that is not explained by the number of inputs used in production

real GDP (p. 159)

the total value of final goods and services produced in a country in a year measured using prices in a base year