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32 Cards in this Set

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Economic Growth Rate =
Real GDP Current Yr.
- Real GDP Previous
Yr. --------------------- x 100
Real GDP Previous Yr.
Growth Rate of real GDP per person =
Growth Rate of Real GDP -
Growth Rate of population
Years it takes for Real GDP per person to double =
70
----------------
Population Growth
Years it takes for Real GDP per person to
double in years given a % slow in growth rate =
70
---------------------
(Economic Growth rate – % slow in GR)
Years it takes for real GDP to double =
70
--------------------
Economic GR
In 2005 real GDP per person was
about 8 times what it was in 1905 and growth rate was about 2 percent per year
Saving and investment increase:
physical capital
Education, training, and job experience increase
human capital
Research advances:
Technology
Real GDP grows when
labor productivity or aggregate hours increase
The preconditions for economic growth are:
economic freedom, property rights and markets.
Economic freedom encourages:
saving, research and development, international trade, and the improvement of education
Property Rights:
strengthen incentive to work and save
Not a key part of economic growth:
Democracy, taxes, investment subsidies, diminishing returns to labor
Economic freedom is not the same as :
Democracy
Foundations of Economic Freedom:
The rule of Law, an efficient legal system, and enforcement of contracts
Hong Kong:
Rapid Economic Growth but not Democracy
Free International Trade
extracts all the available gains from specialization and trade
Labor Productivity calculated in:
hours not billions
2 most important elements:
Economic Freedom and Education
Labor Productivity =
GDP
----------------
Aggregate # of Hrs.
Real GDP =
Aggregate hours x Labor Productivity
Potential GDP =
GDP produced by the full employment quantity of labor
Classical Growth Theory
Population INCREASES when the real wage rate EXCEEDS its subsistence level.
Neoclassical Growth Theory
real GDP per person GROWS if TECHNOLOGY advances
New Growth Theory
growth occurs because of the choices people make in the pursuit of profit (unlimited want).
Thomas Malthus
“We’re doomed”- something will keep population in check like starvation. Not enough to go around.
Joseph Schumpeter
“Creative destruction”. Old stuff gets eaten up by the new. Creates and destroys at same time.
Adam Smith
“Invisible Hand”. Laissez Faire. How the free-market economy really works for everyone. Self- interest and competition. “Wealth of Nations”
Thomas Hobbes
Life = “solitary, poor, nasty, brutish, and short”. Argued for a strong government.
Productivity
More Capital
Better Capital
More Labor
Better Labor
Standard of Living =
GDP
------------
Population
(Person per capita)