7.3
savings rate
the proportion of disposable income that is saved
Describe what the main factors are in technological progress
the rate at which these inputs improve, and the direction of technological progress is represented by the relative pace of these improvements.
Explain how high GDP per capita is linked to quality of life
High GDP per capita usually indicates better nutrition, housing, education, and job opportunities.
Suppose an uncle left you $500 and you had three choices for how to use the money. You could save the $500 in the bank, by computer equipment, or keep it in a save place in your closet. Describe how each of these actions will affect the growth of the economy.
If you put the money in a savings account, it would be lent out to businesses. If you bought computer equipment, it would provide money for the company you bought it from. If you left it in your closet, it would serve no purpose to the economy.
Describe what rule savings play in the process of economic growth
Investment contributes to growth in aggregate wealth. But the investment cannot increasewithout increasing in the amount of saving.
Explain what real GDP per capita is and why economists measure it
Real GDP per capita is a measurement of the total economic output of a country divided bythe number of people and adjusted forinflation. It's used to compare the standard ofliving between countries and over time.
Do you higher taxes increase or reduce investment
Primarily through the supply side. Highmarginal tax rates can discourage work, saving, investment, and innovation.
Technology progress
an increase in efficiency gained by producing more output without using more inputs
Using information from the text describe how the economy grows
an increase in the production of economic goods and services, compared from one period of time to another.
In your own words why does capital deepening work with human capital
greater skill increases workers' output
What is capital formation and how much does it contribute to economic growth
it increases the per capita income and enhances the purchasing power which, in turn, creates more effective demand. Secondly, investment leads to an increase in production.
capital deepening
process of increasing the amount of capital per worker
Real GDP per capita
real GDP divided by the total population
Describe how saving is linked to capital deepening
saving provides money for investment in human & physical capital
saving
setting aside money for future use
capital formation
the accumulation of savings made available for investment