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24 Cards in this Set

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4 supply factors:
1) Increase in quantity and quality of natural resources
2) Increases in quantity and quality of human resources
3) Increases in technology
4) Increases in the stock of capital goods
Demand factor:
Increases in Total Spending
Efficiency Factor:
Using resources in least costly way to produce specific mix of G+S that maximizes well-being: Productive and Allocative Efficiency
Real GDP = ?
Hours of Work x Labor Productivity
Increases in economic growth/production-possibilities cause what and are caused by what?
Increases in long-run aggregate supply

· Supply factors
Economic Growth is realized when? (factors quezstion)
Demand and efficiency factors increase to production possibilities curve set by supply factors
Growth accounting?

What does it watch specifically?
The bookkeeping of the supply-side elements that contribute to changes in real GDP

(1) Hours of Work
(2) Labor Productivity
The average annual rate of increase in real GDP since 1950?
3.5%
Real GDP per capita in US since 1950 grew by average annual rate of?
2.3%
Largest contributor to productivity growth?
Technological Advance - 40%
Second major contributor to productivity growth?
Increased Capital - 30%
How does a nation typically acquire more capital?
Less Consumer Spending and More Capital Investment
Infrastructure?
Capital goods provided by the public for use of its citizens and firms in long-run (airports, freeways, wastewater treatment facilitie, etc)
Human capital?
The knowledge and skills that make a productive worker
Investment in human capital =?
Education and Training
Third major source of productivity growth?
Economies of scale (Reductions in per-unit cost)
Economies of scale result from?
Increases in Size of markets and firms
Fourth major source of productivity growth?
Improved Resource Allocation (Workers over time can move from low-time employment to high-time employment)
Rule of 70: If nation's productivity grows by 2.5% annually rather than 1.5%, Standard of Living will double in?
28 years, not 47 (70 divided by annual percent rate)
New Economy?
Name attached to US Economy since 1995 b/c of more productivity growth and economic growth
New Economy's Cause for productivity growth and economic growth changes?
Global Economy and Rapid Technological Advance
Reasons for Productivity Acceleration:
1) The Microchip and Information Technology
2) New Firms and Increasing Returns
Increasing Returns?
When a firm's output increases by a larger percentage than the increase in its inputs
5 sources of increasing returns and economies of scale for start-up firms:
1) More specialized inputs (Results of investing in human capital)
2) Spreading of development costs over greater output
3) Simultaneous consumption (Ex: Software made once but is available to everyone)
4) Network effects (Increases in value of product to each user as total number of users rises. i.e. Internet e-mail)
5) Learning by doing (Perfected methods take less time to perform than unperfected methods)