Chapter 7: Long-Run Economic Growth: Sources and Policies Flashcards
Industrial Revolution
The application of mechanical power production of goods, beginning in England around 1750
Compounding
Magnifies even small differences in interest rates over long periods of time
Types of economies in the world
- High-income countries - developed
- Lower income countries - developing
Economic Growth Model
A model that explains growth rates in real GDP per capita over the long run
Labor Productivity
The quantity of goods and services that can be produced by one worker or by one hour of work
Technology Change
A change in the quantity of output a firm can produce using a given quantity of inputs
What are the main sources of technology change
- Better machinery and equipment
- Increase in Human Capital
- Better means of organization and managing production
Pre-worker production Function
The relationship between real GDP per hour worked and capital per hour worked, holding the level of technology constant
New Growth Theory
A model of long-run economic growth that emphasizes that technological change is influenced by economic incentives and so is determined by the working of the market system
Rival Physical Capital
Capital that is one firms uses it, other firms cannotEx
Excludable Capital
Capital that if the firm that owns the capital can keep other firms from using it
Government Policy that help increase accumulation of knowledge
- Protecting intellectual property with patents and copyrights
- Supporting research and development
- Subsidizing education
Why do other high-income countries have trouble completely closing the gap in real GDP per capita with the US
- Greater flexibility of US labor markets
- Greater efficiency of the US financial system
Why don’t more low-income countries experience rapid growth
- Failure to enforce rule of law
- Wars and revolutions
- Poor public education and health
- Low rates of saving and investment
Globalization
The process of countries becoming more open to foreign trade and investment
