Notes for Week 4
Notes for Week 4 Econ 253-101
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This 2 page Class Notes was uploaded by Kayla Notetaker on Friday September 25, 2015. The Class Notes belongs to Econ 253-101 at Marshall University taught by Dr. Yuanyuan (Catherine) Chen in Fall 2015. Since its upload, it has received 30 views. For similar materials see Principles of Macroeconomics in Economcs at Marshall University.
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Date Created: 09/25/15
Macroeconomics 253 1 Chapter 10 Economic Growth Financial Systems and Business Cycles Economic Growth the ability of firms to expand by means of having up to date equipment hiring workers having new technology Firms acquire funds for these through households 0 Business Cycle the alternation of expansion and recession through an economy considered short term Calculating Growth Rates LongRun Growth rising productivity will result in the increase of the average standard of living 0 The best measure of this is through calculating the Real GDP per capita per person 0 Use Real GDP instead of Nominal GDP to adjust for the changes in price levels Real GDP focuses more on output than price 0 To find the change overtime Real GDPQ Real GDPt1 Real GDPt1 x 100 Example You are comparing the growth from 1900 to 2000 The Real GDP in 1900 was 6000 while the Real GDP in 2000 was 45000 45000 6000 6000 x 100 A or 650 growth Average Annual Growth Rate For shorter periods of time For example if the average growth rate of 2012 is 21 33 in 2013 and 2 in 2014 21 2012 33 2013 2 2014 247 Annual 3 number of years involved Growth Rate gtM If there would happen to no change you put 0 for the year with no change This does NOT mean that year produced nothing it means that year produced the same amount as the previous year Rule of 70 How many years will it take for real GDP per capita to double uses the Rule of 70 to calculate L Number of Years Growth Rate To Double For instance if the growth rate is 5 70 5 14 Years Macroeconomics 253 2 do NOT use 005 for 5 Use the actual percentage number What determines the rate of LongRun Growth Labor Productivity the quantity of goods and services that are produced by one worker or by one hour 0 Two factors determine Labor Productivity 0 Quantity of capital K per hour 0 Technology 0 Capital Stock the total amount of physical capital per hour in other words as capital stock increases so does worker productivity 0 Human Capital the knowledge and skill a worker accumulates through experience and training Technological Change increase in the quantity of outputs firms produce using a certain quantity of inputs 0 Technology refers to the processes a firm uses to turn limited inputs into outputs goods and services 0 Most change is focused on new machinery and equipment 0 Entrepreneurs and the government have important in uences o Entrepreneurs bring together factors of production labor capital natural resources to produce the goods and services They make the decisions to introduce new technology 0 Government plays a role in providing property rights for entrepreneurs