Chapter 9 Flashcards

1
Q

Real GDP per capita and it is a measurement of a countries_____ _____ over time and ____ of living

A

output per person, real GDP/population size, measurement of countries economic growth over time and standard of living

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2
Q

why do we focus on Real GDP per capita for long term economic growth

A

isolate effect of changes in population ex population increase, cost of living decrease

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3
Q

What did WW2 allow in terms of growth

A

economic boosts, increase spending, increase production output

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4
Q

Growth Rates

A

long term process, real GDP per capita grows a few percent per year

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5
Q

rule of 70

A

of years for real GDP per capita or any variable to double

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6
Q

rule of 70 equation

A

of years for variable to double= 70/ annual growth rate of variable, (only applied to positive growth rate)

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7
Q

ex: how many years did it take canadian economy to double 3 times with an annual growth rate of 2%

A

70/2=35 years to double once

35x3=105

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8
Q

How much did GDP per capita increase during this time

A

by a factor of 8 2x2x2=8

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9
Q

large sustainable increase in GDP per capita is due to

A

labour productivity

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10
Q

the determinants of economic growth (3)

A

rising productivity, high savings, investment spendings,

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11
Q

sustained economic growth

A

amount of output produced by average worker increases steadily

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12
Q

labour productivity and equation

A

output per worker or hour, GDP/ #of people working

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13
Q

factors of long term growth 3

A

human and physical capital, technology

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14
Q

aggregate production function

A

Y=AxF(K,L,H)

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15
Q

per worker production function

A

Y/L=AxF(K/L,H/L)

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16
Q

what do variables in production equation stand for

A
Y=GDP
A=Technology
F=aggregate production function
K=Physical Capital
L=Labour
H=Human Capital
17
Q

how does aggregate real output for economy increase

A

when either of the factors improves

18
Q

MPk positive productivity of physical capital

A

productivity is increased from small increase in physical capital

19
Q

What happens if we hold total factor productivity constant or technology constant

A

production would show how technology is increasing production, vise-versa

20
Q

growth accounting

A

estimate contribution of each factor in aggregate production function to growth

21
Q

total factor productivity

A

amount of output that can be produced with given amount of factor inputs

22
Q

Diminishing returns to physical capital (theory works for all inputs)

A

holding all else constant, each successive increase in KL leads to a diminishing smaller increase in productivity

23
Q

How can diminishing returns disappear

A

other factor inputs increase ex human capital, technology, or both

24
Q

Natural Resources

A

in the past were a large role, modern world is now switched human, physical and technology

25
Is long term economic growth possible with finite resources
yes, our factor inputs are vital to finding new ways to sustain our economic growth, ex finding alternatives to natural resources
26
Do we need lots of resources to have increase in factor outputs
no
27
Why do growth rates differ amongst countries (3)
depends on a countries 1. private savings and investment spendings (K/L) 2. Education investments (H/L) 3. Research and development funding (A)
28
Role of Government in Growth (4)
creating environment that promotes economic growth 1. Subsidies to infrastructure, education and R&D 2. Maintaining a well-functioning financial system 3. Protection of Property Rights 4. Political Stability and Good Governance
29
1. subsidies to infrastructure, education and R&D | which is which for H/L, K/L, A ????
infrastructure-physical capital education- human capital R&D- technology
30
2. maintaining a well functioning regulated financial system
principle in which savings are channeled into investment spendings
31
3. protection of property rights
patents, owners rights of valuables
32
4. Political Stable and Good Governance
Laws, Institution to enforce laws
33
Convergence Hypothesis
Low GDP per capita countries will catch up with higher GDP per capita countries
34
Left Behind Growth (3)
- not all individuals and groups benefit from growth - real GDP tends to translate to real median income - growth goes to rich so median and poorer growth decline