economic growth
TRANSCRIPT
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ECONOMIC
GROWTH
17C H A P T E R
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• Increases in the Quantity &
Quality of Natural Resources, • Human Resources• Capital Goods• Improvements in Technology
GROWTH ECONOMICS
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What Policies HelpEconomic Growth?
• Increased Savings
• Education
• Comparative Advantage
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PRODUCTION POSSIBILITIES ANALYSIS
Economic Growth
A
B
C
D
a
b
Cap
ital
Go
od
s
Consumer Goods0
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PRODUCTION POSSIBILITIES ANALYSIS
Labor and Productivity
Real GDP =Hours
of WorkX
LaborProductivity
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•Size of employed labor force
•Average hours of work
•Technological advance
•Quantity of capital•Education and training
REALGDP
SUPPLY DETERMINANTSOF REAL OUTPUT
LaborInputs(Hours
of Work)
LaborProductivity
(AverageOutput
Per Hour)
X =
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GROWTH IN THE AD-AS MODEL
A
B
C
D
Ca
pit
al G
oo
ds
Consumer Goods
Pri
ce
Lev
el
Real GDP
ASLR1 ASLR2
Q1 Q2
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ECONOMIC GROWTH IN THEEXTENDED AD – AS MODEL
Pri
ce L
evel
Real GDP
o
P1
AS2
ASLR1
AD2
Q1
ASLR2
Q2
AD1
AS1
P2
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U.S. Economic Growth,Annual Averages for Five Decades
1950-1959 1960-1969 1970-1979 1980-1989 1990-1999
U.S. ECONOMIC GROWTH RATES
5
4
3
2
1
0
Real GDP Real GDP Per Capita
Av
era
ge
An
nu
al I
nc
reas
e (
Pe
rce
nt)
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ACCOUNTING FOR GROWTH
Increase in Real GDP
Increase in quantity of labor
Increase in labor productivity
Accounting for Growth of U.S. Output, 1960-2008
1960 Q2to 1973 Q4
1973 Q4to 1990 Q3
1990 Q3to 2002 Q3
2002 Q3to 2008 Q4*
4.2
1.6
2.6
2.9
1.6
1.3
2.9
0.9
2.0
3.2
1.4
1.8
*Rates beyond 2002 are projections
Source: Economic Report of the President, 2003
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Changes in the Educational Attainment of the U.S. Adult Population
1950 1960 1970 1980 1990 2000
100
80
60
40
20
0
College Graduates or More High School Graduates or More
ACCOUNTING FOR GROWTH
Source: U.S. Census Bureau
Pe
rce
nt
of
U.S
. Po
pu
lati
on
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GLOBAL PERSPECTIVEAverage Test Scores, 8th. Grade, 1999
Source: Third International Math and Science Study
MathematicsRank Score
ScienceRank Score
12345678910 19
604587585582579558540534532531502
SingaporeSouth KoreaTaiwanHong Kong(China)
JapanBelgiumNetherlandsSlovak RepublicHungary Canada United States
123456789
1018
569568552550549545540539538535515
TaiwanSingaporeHungaryJapanSouth KoreaNetherlandsAustraliaCzech RepublicUnited KingdomFinlandUnited States
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IS GROWTH DESIRABLEAND SUSTAINABLE?
The Antigrowth View
In Defense of
Economic Growth
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economic growth
supply factors
demand factor
efficiency factor
labor productivity
labor-force participation rate
growth accounting infrastructurehuman capitaleconomies of scaleNew Economyinformation technologystart-up firmsincreasing returnsnetwork effectslearning by doing
ENDBACKCopyright McGraw-Hill/Irwin, Inc. 2005
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Deficits,Surpluses
and thePublic Debt
Chapter 18 Next...
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The End