Economic Growth
Amalgam factors: education, training, experience, intelligence, etc.
Human capital
Real GDP per person will go up if average labor productivity
Increases
Diminishing returns to capital implies that if the amount of labor and other imports is held constant, then the greater the amount of capital already in use, the ________________ and additional unit of capital adds to total output
Less
_______ interest is the payment of interest only on the original deposit
SIMPLE
_______ is output per employed worker
average labor productivity
Real GDP per capita
average labor productivity * the share of the population employed
Worker's productivity depends
both physical capital and human capital
__________________ interest is the payment of interest not only on the original deposit but on all previously accumulated interest
compound
One of the cost of economic growth is that
current consumption may need to fall in order to expand the capital stock
Government can encourage economic growth by promoting polices aimed at
encouraging household saving increasing workers's human capital encouraging entrepreneurship
US, Gov. encourages human capital accumulation by providing
funding for head start free public education financial aid
Gov support basic research when the research
has widespread economic benefits to society in general
small diff in real GDP growth rates between two counties will
have large diff in average living standards over a long period of time
As we look to the future, it is likely that increase in real GDP per person will be driven by
increase in average labor productivity
following policies promote investment and saving
investment tax credit Retirement accounts IRA
Economic growth
likely to come at the expense of current consumption
Workers with a larger stock of human capital are generally ______ productive
more
more training
more human capital
Average labor productivity is
output per employed worker
capital goods
oven and kitchen
Economic Growth is measured
real GDP per person
U.S. increase over the last 100 years
share of pop employed average labor productivity output per person
72/growth interest rate
tells the # of years it will take GPD per capita to double
Economic growth tends to be higher when the property rights are
well-defined
Gov funds research
private firms may not have adequate incentives to invest in R&d It promotes economic growth
When knowledge has widespread benefits that cannot be captured by a single private firm
private firms will not have adequate incentives to invest in R&d The gov. may need to support research
Increase in real GDP can arise from the
intro of new products dev of higher quality products increased production
in the future, the share of the pop employed is likely to
FALL women enter and baby boom gen
Arguments that continued economic growth will deplete natural resource s and cause massive environmental damage ignore the fact that
Econ Growth can arise from production of high-quality products and not just production Increased wealth and productivity expand a society's capacity to take measures
an _________ is someone who creates new economic enterprises
Entrepreneur
If you invest $100 in savings account with an interest rate of 7%, compound annually, then how much money will be in your account after 9 years?
Future value = Present Value X (1 + interest rate) ^ # years Remember finance: Financial Calculator PV : insert -
