Macroeconomics Chapter 9: Long-run Economic Growth – Flashcards
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Real GDP per capita
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real GDP / population size
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The Rule of 70
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tells us how long it takes real GDP per capita, or any other variable that grows over time, to double: 70/annual growth rate of variable
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labor productivity
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often referred to just as productivity, is output per worker
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3 main reasons why US worker purchases are far more than their counterpart a century ago
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1.) Have more physical capital 2.) more educated so more human capital 3.) technological progress
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Physical capital
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consists of human-made resources such as buildings and machines
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Human capital
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improvement in labor created by the education and knowledge embodied in the work force
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Technological progress
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ash advance in the technical means of the production of goods and services
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aggregate production function
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a hypothetical function that shows how productivity (Real GDP per worker) depends on the quantities of physical capital per worker and human capital per worker as well as the state of technology
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Brookings institution aggregate production function
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GDP per worker = T x (Physical capital per worker)^0.4 x (human capital per worker)^0.6 where T = estate of level of technology
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Diminishing returns of physical capital
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exhibited by the APF when, holding the amount of human capital per worker and the state of technology fixed, each successive increase in the amount of physical capital per worker leads to smaller increase in productivity
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Growth Accounting
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estimates the contribution of each major factor in the aggregate production function to economic growth ex: the amount of physical capital per worker grows 3% per year
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Total factor productivity
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is the amount of output that can be achieved with a given amount of factor inputs
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Research and Development (R&D)
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spending to create and implement new technologies
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Government policies can increase the economy's growth rate through 4 main channels
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1.) Government subsidies to infrastructure 2.) Government subsidies to education 3.) Government subsidies to R&D 4.) Maintaining a well-functioning financial system
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Property rights
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the rights of owners of valuable items to dispose of those items as they choose
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intellectual property rights
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are the rights of an innovator to accuse the rewards of their innovation
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convergence hypothesis
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according to this, international differences in real GDP per capita tend to narrow over time
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sustainable long-run economic growth
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is long run growth that can continue in the face of the limited supply of natural resources and the impact of growth on the environment
