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© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 12.11

CHAPTER 12

Economic Growth

12.1 The PPF, Economic Growth, and

Productivity

12.2 Living Standards and Labor

Productivity Growth

12.3 Issues of Technological Change


CHAPTER 12

Economic Growth

Why do surgeons earn more than barbers, and accountants earn

more than file clerks?

Why is the standard of living so much higher in some countries

than in others?

How can a nation boost its standard of living?

Why is the economy’s long-term growth rate more important than

short-term fluctuations in economic activity?

What is labor productivity, and why has it grown faster in recent

years?

Consider


LESSON 12.1

The PPF, Economic

Growth, and Productivity

Use the production possibilities frontier

to analyze economic growth.

Define labor productivity, and discuss

what can increase it.

Objectives


LESSON 12.1

The PPF, Economic

Growth, and Productivity

standard of living

productivity

labor productivity

human capital

Key Terms

physical capital

capital deepening

rules of the game


The PPF and

Economic Growth

The production possibilities frontier shows alternative

combinations of goods that the economy can produce

if available resources are used efficiently.

An outward shift of the production possibilities frontier

reflects economic growth.

The economy grows because of a greater availability of

resources, and improvement in the quality of

resources, technological breakthroughs that make

better use of resources, or improvements in the rules of

the game that enhance production incentives.


Economic Growth Shown by Outward Shifts

of the Production Possibilities Frontier


Capital and Growth

The amount of capital produced this

year will affect the location of the PPF

next year.

To invest in capital, people in the

economy must save more now.


Productivity

The standard of living is an economy’s

level of economic prosperity, best

measured by the value of goods and

services produced per person.


Labor Productivity

Productivity compares total output to a

specific measure of input.

Labor productivity is the output per unit

of labor.


Human and Physical Capital

Human capital is the accumulated

knowledge, skill, and experience of the

labor force.

Physical capital, or capital goods,

includes the machines, building, roads,

airports, communications networks and

other manufactured creations used to

produce goods and services.


Capital Deepening

An increase in the quantity and quality of

capital per worker is called capital

deepening.

Capital deepening contributes to labor

productivity and to economic growth.


Rules of the Game

Formal and informal institutions that

provide production incentives and

promote economic activity

Laws, customs, and conventions that

encourage people to undertake

productive activity


LESSON 12.2

Living Standards and

Labor Productivity Growth

Explain why there is such a difference among

countries in the standard of living.

Evaluate the record of U.S. labor productivity

growth, and explain why even small

differences in growth rates are important.

Objectives


LESSON 12.2

Living Standards and

Labor Productivity Growth

industrial market countries

developing countries

Group of Seven (G-7)

Key Terms


Standard of Living

Industrial market countries

Developing countries

Education and economic development

Group of Seven (G-7)


U.S. Labor Productivity

and Output Per Capita

Record over the long run

Slowdown and rebound in productivity

growth

Output per capita

International comparisons


Long-Term Trend in U.S. Labor Productivity

Growth: Annual Average by Decade


U.S. Labor Productivity Growth


U.S. Real GDP

Per Capita Since 1959


U.S. GDP Per Capita as Compared

to Other Major Economies


LESSON 12.3

Issues of

Technological Change

Discuss the impact of research and

development on the standard of living.

Explain the relationship between technological

change and employment levels.

Describe industrial policy, and argue for and

against its use.

Objectives


LESSON 12.3

Issues of


basic research

applied research

industrial policy

cluster

Key Terms


Research and Development

Basic research

Applied research

R&D comparisons across countries


R&D Spending as a Percentage of GDP for

Major Economies During the 1980s and 1990s



and Employment Levels

Technological change and labor

productivity

Technological change and employment

levels across countries


Industrial Policy

Government involvement

Identifying industry clusters

Pitfalls of picking technological winners

chapter 12 economic growth -...

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