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Econ  Ch16  Economic  Growth
 

Econ Ch16 Economic Growth

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    Econ  Ch16  Economic  Growth Econ Ch16 Economic Growth Presentation Transcript

    • Chapter Economic Growth 16
    • Objective:
      • Students explain what causes economic growth.
    • Aggregate Supply
      • Economic growth=increase in real GDP
      • Aggregate supply is the total quantity of goods and services produced in the economy at that time.
      • Q: How does aggregate supply differ from supply in general?
    • Like the supply curves you studied in Chapter 5, it is determined, at least in part, by the desire of firms to earn a profit. That is why the graph shows output increasing as the price level rises.
    • Aggregate Demand
      • Aggregate demand is a term that describes the various quantities of goods and services that all people, taken together, are willing and able to buy at various price levels in a specific period of time.
      • It represents all of the demand within the economy.
      • Keep in mind that when economists speak of aggregate demand, they are referring to an average price level, not to the price of any single product.
      • Among the factors that affect aggregate demand is a change in savings.
      • If consumers save less and spend more, the increase in consumer spending increases aggregate demand.
      • In much the same way, an increase in savings can result in a decrease in aggregate demand—leaving consumers with less money to spend.
    • Macroeconomic Equilibrium
      • At any other level of output or price, the economy tends to be unstable.
      • It is not likely to last, and eventually the economy will return to point Q .
      • Macroeconomic equilibrium is the point at which aggregate supply balances aggregate demand.
      • Think equilibrium price but on a national level.
    • Examining Economic Growth
      • Real economic growth occurs when GDP increases faster than the population.
      • The result is an improvement in the overall standard of living.
      Have you ever ordered a pizza only to have a couple of hungry friends show up unexpectedly?
    • GDP & Population Growth
      • Regression = pop. Growth but no GDP growth
      • Stagnation = both increase at same rate
      • GDP per capita (per person)= better measure of the effects of growth than Real GDP
    • Standard of Living
      • The term standard of living refers to the overall quality of life.
      • It is usually measured by real GDP per capita.
    • Comparing Standards of Living Suburban community in Niger, Africa Suburban community in the United States
    • Sources of Economic Growth
      • Factors of Production
      • Natural Resources
      • Labor
      • Capital
      • Entrepreneurship
      • Productivity Gains
      • increases in the skills of workers.
      • increases in the ratio of capital to labor.
      • improved use of all factors of production.
      • the development and use of better equipment and products.
    • Sources of Economic Growth
      • Productivity Gains Come From
      • increases in the skills of workers.
      • increases in the ratio of capital to labor.
      • improved use of all factors of production.
      • the development and use of better equipment and products.
      • More productive workers
        • Ex: education/on-the-job training
      • Capital Investment
        • Ex: tools/equipment
      • Management
        • Ex: good decisions
      • Research & Development
        • Ex: improvements/inventions
    • R&D + Capital Investment = Economic Growth Tools wear out and depreciate Capital Investment: buy new tools Research & Development: Latest greatest tools Buy New, Improved Equipment: often before old ones wear out R&D Leads to Capital Investment
    • Review: Terms to Know
      • Aggregate Supply
      • Aggregate Demand
      • Macroeconomic Equilibrium
      • Economic Regression
      • Economic Stagnation
      • GDP per capita
      • Standard of Living
      • Research & Development
    • Can You Answer?
      • How does aggregate supply differ from supply in general? Aggregate demand?
      • What is the relationship between economic growth and population growth?
      • What is the relationship between economic growth and standard of living?
      • What are four sources of economic growth?