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7 Cards in this Set
- Front
- Back
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Growth |
Expansion in the productive capacity of the economy. When it is able to produce more units of rice, shoes, laptops, and cars and more service hours, the economy is said to be growing. Relates to PRODUCTION. |
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Development |
A broader concept that relates to several things, including health, education, quality of life, etc. |
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Measuring Growth |
Look at the change in the country's gross domestic product (GDP). Growth economists are usually more interested in GDP per capita. |
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GDP per capita |
GDP divided by the country's population.
Also known as Average Income. Only a number; captures only indirectly the true quality of life of the people in a country. |
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International Dollar |
"Common currency" Takes account not only the exchange rate but also the differences in price levels. (Purchasing power parity) |
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Convergence |
Given enough time, poor countries will catch up with rich ones because of this differential in growth rates. Suggests some hidden structure in economic growth across countries. Also vindicates capitalism. |
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Neoclassical Growth Model |
- Robert M. Solow Begins by assuming that the entire economy is perfectly competitive. We do this to abstract away from the distractions market failures bring and get to the heart of how economies grow. It assumed an aggregate production function: Y = AF(K,N) Y - output K and N = (aggregate) capital and labor, respectively. F(•) = aggregate production function itself. A = aggregate productivity, a catch-all measure for the current state of technology, efficiency, and know-how. |
