Chapter 7 : Long-Run Economic Growth : Sources and Policies Flashcards
Industrial Revolution :
The application of mechanical power to the production of goods, beginning in England around 1750
Economic growth model :
Explains growth rates in real GDP per capita over the long run
Labour productivity :
Quantity of goods & services that can be produced by 1 worker or by 1 hr of work
What are the 2 factors that determine labour of productivity?
- Quantity of capital available to workers
- Level of tech
Technological change :
Change in the quantity of output firms can produce using a given quantity of inputs
What are the 3 main sources of tech change?
- Better machinery and equipment
- Increases in human capital
- Better means of organizing and managing production
Per-worker-production function :
The relationship between real GDP per hour worked and capital per hour worked, holding the level of tech constant
New growth theory :
A model of long-run economic growth that emphasizes that tech change is influenced by economic incentives and so is determined by the working of the market system
Patent
Gives a firm the exclusive legal right to a new product for a period of 20 yrs from he date the patent application is filed w the gov.
What are the 2 economists views?
- The optimistic view
- The pessimistic view
Catch-up :
The prediction that the level of GDP per capita in poor countries will grow faster than in rich countries.
4 key factors why many low-income countries growing so slowly? :
- Failure to enforce the rule of law
- Wars and revolutions
- Poor public education and health
- Low rates of saving and investment
Rule of law :
The ability of a gov to enforce the laws of the country, particularly with respect to protecting private property and enforcing contracts
Foreign direct investment :
The purchase or building by a corporation of a facility in a foreign country.
Foreign portfolio investment :
When an individual or a firm buys stocks or bonds issued in another country
The keys to higher living standards :
- Establish the rule of law
- Provide basic education and health care for the population, & integrate women into the economy
- Increase the amt of capital per hour worked
- Adopt the best tech
- Participate in the global economy
Formula to calculate average annual growth rate for a period:
sum of the growth rate for each yr / # of growth rate yrs
why does growth rate matter
- when a country sustains high growth rates, life expectancy at birth increases
- high growth rates coincide with improved living standards
- high levels of sustained economic growth reduce infant mortality
Brain drain :
When well-educated individuals find very few opportunities in their own developing countries, and leave for industrial countries.
