Chapter 9 Flashcards
Rule of 70
The time it takes a variable that grows gradually over time to double =
70
Annual growth rate of vaiable
Sustained economic growth occurs when __________________________________
The amount of output produced by the average worker increases steadily
Labor productivity
“productivity”
Output per worker
Real GDP
Number of people working
Three factors of productivity
- More physical capital
- More human capital - more educated
- Technological progress
Physical capital
Consists of human-made resources such as buildings and machines
Human capital
The improvement in labor created by the education and knowledge embodied in the workforce
growth accounting
Estimates the contribution of each major factor in the aggregate production function to economic growth
Amount of physical capital per worker grows ___________
3% a year
Aggregate production function
A hypothetical function that shows how productivity depends on the quantities of physical capital per worker, human capital per worker, and technological progress
Diminishing returns to physical capital
When holding the amount of human capital per worker and technology fixed, each increase in physical capital per worker leads to a smaller increase in productivity
Total factor productivity
The amount of output that can be achieved with a given amount of factor inputs
Research and development
Spending to create and implement new technologies
Infrastructure
Roads, power lines, ports, information networks, and other underpinnings for economic activity
Property rights
The rights of owners of valuable itmes to dispose of those items as they choose
Intellectual property rights
The rights of an innovator to accrue the rewards of her innovation
Patent
A government-created temporary monopoly given to an innovator for the use or sale of his or her innovation
cerrado
The tropical savanna land in Brazil
Exogenous
The sources of technological progress were outside the models of economics and assumed to “just happen”
Endogenous
The outcome of economic variables and incentives
Convergence hypothesis
International differences in real GDP per capita tend to narrow over time
Conditional convergence
When adjusted for differences in other factors, poor countries tend to have higher growth rates
Sustainable long-run economic growth
Long-run growth that can continue in the face of the limited supply of natural resources and the impact of growth on the environment
Negative externality
A cost that individuals or firms impose on others without having to offer compensation
Logistics
Getting stuff where it is needed, when it is needed
