economic growth
TRANSCRIPT
ECONOMIC
GROWTH
17C H A P T E R
• Increases in the Quantity &
Quality of Natural Resources, • Human Resources• Capital Goods• Improvements in Technology
GROWTH ECONOMICS
What Policies HelpEconomic Growth?
• Increased Savings
• Education
• Comparative Advantage
PRODUCTION POSSIBILITIES ANALYSIS
Economic Growth
A
B
C
D
a
b
Cap
ital
Go
od
s
Consumer Goods0
PRODUCTION POSSIBILITIES ANALYSIS
Labor and Productivity
Real GDP =Hours
of WorkX
LaborProductivity
•Size of employed labor force
•Average hours of work
•Technological advance
•Quantity of capital•Education and training
REALGDP
SUPPLY DETERMINANTSOF REAL OUTPUT
LaborInputs(Hours
of Work)
LaborProductivity
(AverageOutput
Per Hour)
X =
GROWTH IN THE AD-AS MODEL
A
B
C
D
Ca
pit
al G
oo
ds
Consumer Goods
Pri
ce
Lev
el
Real GDP
ASLR1 ASLR2
Q1 Q2
ECONOMIC GROWTH IN THEEXTENDED AD – AS MODEL
Pri
ce L
evel
Real GDP
o
P1
AS2
ASLR1
AD2
Q1
ASLR2
Q2
AD1
AS1
P2
U.S. Economic Growth,Annual Averages for Five Decades
1950-1959 1960-1969 1970-1979 1980-1989 1990-1999
U.S. ECONOMIC GROWTH RATES
5
4
3
2
1
0
Real GDP Real GDP Per Capita
Av
era
ge
An
nu
al I
nc
reas
e (
Pe
rce
nt)
ACCOUNTING FOR GROWTH
Increase in Real GDP
Increase in quantity of labor
Increase in labor productivity
Accounting for Growth of U.S. Output, 1960-2008
1960 Q2to 1973 Q4
1973 Q4to 1990 Q3
1990 Q3to 2002 Q3
2002 Q3to 2008 Q4*
4.2
1.6
2.6
2.9
1.6
1.3
2.9
0.9
2.0
3.2
1.4
1.8
*Rates beyond 2002 are projections
Source: Economic Report of the President, 2003
Changes in the Educational Attainment of the U.S. Adult Population
1950 1960 1970 1980 1990 2000
100
80
60
40
20
0
College Graduates or More High School Graduates or More
ACCOUNTING FOR GROWTH
Source: U.S. Census Bureau
Pe
rce
nt
of
U.S
. Po
pu
lati
on
GLOBAL PERSPECTIVEAverage Test Scores, 8th. Grade, 1999
Source: Third International Math and Science Study
MathematicsRank Score
ScienceRank Score
12345678910 19
604587585582579558540534532531502
SingaporeSouth KoreaTaiwanHong Kong(China)
JapanBelgiumNetherlandsSlovak RepublicHungary Canada United States
123456789
1018
569568552550549545540539538535515
TaiwanSingaporeHungaryJapanSouth KoreaNetherlandsAustraliaCzech RepublicUnited KingdomFinlandUnited States
IS GROWTH DESIRABLEAND SUSTAINABLE?
The Antigrowth View
In Defense of
Economic Growth
economic growth
supply factors
demand factor
efficiency factor
labor productivity
labor-force participation rate
growth accounting infrastructurehuman capitaleconomies of scaleNew Economyinformation technologystart-up firmsincreasing returnsnetwork effectslearning by doing
ENDBACKCopyright McGraw-Hill/Irwin, Inc. 2005
Deficits,Surpluses
and thePublic Debt
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The End