Economic Growth CH12 Slides 20-27

Economic Growth
CH12 Slides 20-27

❖Measuring Economic Growth

➢GDP and population growth

■real GDP per capita (per person)

➢GDP and the quality of life

■where is the money spent—guns or

butter?

■standard of living depends on income

distribution

Economic Growth

Multiple Choice

What is GDP?

• GDP is the total monetary value of all finished goods and services produced within a country's borders in a specific time period.
• GDP is the total number of goods imported by a country
• GDP is the average income of a country's citizens
• GDP is the total population of a country

❖Capital Deepening

➢Putting more money into the economy

via technology, education, and training
improves the chance of a better
economy in the future
■can be physical or human capital

Multiple Choice

What is "Capital Deepening"

• Capital Widening is the process of decreasing the amount of capital per worker in an economy.
• Capital Deepening refers to the reduction of technology in the production process.
• Capital Deepening is the act of increasing the number of workers in an economy.
• Capital deepening is the process of increasing the amount of capital per worker in an economy.

❖Saving and Investment

➢Income not used for consumption is

saving

➢Savings rate—disposable income

that is saved

Multiple Choice

What is "savings rate"

• Savings rate is the interest rate on a savings account.
• Savings rate is the amount of money saved in a bank account.
• Savings rate is the percentage of income that a person saves instead of spending.
• Savings rate is the total income earned in a year.

❖Population, Government, and Trade

➢Population growth

■larger populations can lead to

lower standards of living

➢Government

■tax policies can reduce or expand

saving and investment

■government policies can help

capital deepening
●e. g.—education,

infrastructure, and other
public goods

➢Foreign trade

■trade deficits or surpluses

❖Technological Progress

➢An increase in efficiency gained by

using technology

➢Measuring technological progress

■adds approximately 1% per year

to GDP

Multiple Choice

How much does technological progress add per year to the GDP?

• 2-3%
• 4-5%
• 3-4%
• 0.5-1%

➢Causes of technological progress

■scientific research
■innovation
■scale of the market

●larger markets provide more

incentives for innovation

●education and experience
●natural resource use

◆leads to greater efficiency and more

creative uses for scarce resources

Open Ended

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