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