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 -