This document discusses factors that influence economic growth, including increases in natural resources, human resources, capital goods, and technology. It examines policies that can promote growth, such as increased savings, education, and comparative advantage. Graphs illustrate the production possibilities frontier and how economic growth shifts the aggregate supply curve to the right. Tables show US growth rates over time and the contributions of labor quantity, productivity, and their interaction to output growth. Charts depict rising educational attainment in the US population from 1950 to 2000. International test score rankings demonstrate differences in human capital across countries. The document considers debates around the desirability and sustainability of economic growth.

1. ECONOMIC GROWTH 17 C H A P T E R

2. Increases in the Quantity & Quality of Natural Resources, Human Resources Capital Goods Improvements in Technology GROWTH ECONOMICS

3. What Policies Help Economic Growth? Increased Savings Education Comparative Advantage

4. PRODUCTION POSSIBILITIES ANALYSIS Economic Growth A B C D a b Capital Goods Consumer Goods 0

5. PRODUCTION POSSIBILITIES ANALYSIS Labor and Productivity Real GDP = Hours of Work X Labor Productivity

6. Size of employed labor force Average hours of work Technological advance Quantity of capital Education and training REAL GDP SUPPLY DETERMINANTS OF REAL OUTPUT Labor Inputs (Hours of Work) Labor Productivity (Average Output Per Hour) X =

7. GROWTH IN THE AD-AS MODEL A B C D Capital Goods Consumer Goods Price Level Real GDP AS LR1 AS LR2 Q 1 Q 2

8. ECONOMIC GROWTH IN THE EXTENDED AD – AS MODEL Price Level Real GDP o P 1 AS 2 AS LR1 AD 2 Q 1 AS LR2 Q 2 AD 1 AS 1 P 2

9. U.S. Economic Growth, Annual Averages for Five Decades 1950-1959 1960-1969 1970-1979 1980-1989 1990-1999 U.S. ECONOMIC GROWTH RATES Average Annual Increase (Percent) 5 4 3 2 1 0 Real GDP Real GDP Per Capita

10. ACCOUNTING FOR GROWTH Increase in Real GDP Increase in quantity of labor Increase in labor productivity Accounting for Growth of U.S. Output, 1960-2008 1960 Q2 to 1973 Q4 1973 Q4 to 1990 Q3 1990 Q3 to 2002 Q3 2002 Q3 to 2008 Q4* 4.2 1.6 2.6 2.9 1.6 1.3 2.9 0.9 2.0 3.2 1.4 1.8 *Rates beyond 2002 are projections Source: Economic Report of the President, 2003

11. Changes in the Educational Attainment of the U.S. Adult Population 1950 1960 1970 1980 1990 2000 ACCOUNTING FOR GROWTH Source: U.S. Census Bureau Percent of U.S. Population 100 80 60 40 20 0 College Graduates or More High School Graduates or More

12. GLOBAL PERSPECTIVE Average Test Scores, 8 th . Grade, 1999 Source: Third International Math and Science Study Mathematics Rank Score Science Rank Score 1 2 3 4 5 6 7 8 9 10 19 604 587 585 582 579 558 540 534 532 531 502 Singapore South Korea Taiwan Hong Kong(China) Japan Belgium Netherlands Slovak Republic Hungary Canada United States 1 2 3 4 5 6 7 8 9 10 18 569 568 552 550 549 545 540 539 538 535 515 Taiwan Singapore Hungary Japan South Korea Netherlands Australia Czech Republic United Kingdom Finland United States

13. IS GROWTH DESIRABLE AND SUSTAINABLE? The Antigrowth View In Defense of Economic Growth

14. economic growth supply factors demand factor efficiency factor labor productivity labor-force participation rate growth accounting infrastructure human capital economies of scale New Economy information technology start-up firms increasing returns network effects learning by doing KEY TERMS END BACK Copyright McGraw-Hill/Irwin, Inc. 2005

15. Deficits, Surpluses and the Public Debt Chapter 18 Next...

16. The End