NotesCh10.pdf Econ 1051
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This 5 page Class Notes was uploaded by Lauren Pike on Friday October 16, 2015. The Class Notes belongs to Econ 1051 at University of Missouri - Columbia taught by George Chikhladze,Martha Steffens in Fall 2015. Since its upload, it has received 31 views. For similar materials see General Economics in Economcs at University of Missouri - Columbia.
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Date Created: 10/16/15
Ch 10 GDP and Economic Growth GDP 0 NlPAnational income and product accounts national accounts that measure overall production and income of econ for nation as a whole 0 GDP total market value of goodsservices produced within the borders of a country during a specific period of time total spending and total income of econ o a monetary measure 0 GDP is type of monetary measure o avoiding multiple counting 0 GDP includes only market value of final goods so productsservices aren t counted more than once ignores intermediate goods I final goods goodsservices that are purchased by their end users 0 ex gasoline I intermediate goods goodsservices that are purchased for resale or further processingmanufacturing 0 ex crude oil 0 excluding second hand sales and financial transactions 0 don t contribute to current prod so they don t to GDP either 0 purely financial transactions don t count as part of GDP as well bc money changes hands but nothing is produced I sale of stocks and bonds 0 private transfer payments not included I ex 88 medicare Measuring GDP 0 expenditures approach add everything up economists group into 4 categories 0 personal consumption expenditures C I covers all expenditures by households on durable goods nondurable goods and consumer expenditures for services domesticforeign produced goods 0 gross private domestic investment lg I newly produced capital goods and additions to inventories 0 machines equipments tools all construction change in inventories creation of new capital assets non investment transactions not included 0 gov purchases G I gov expenditures on final goodsservices and publicly owned capital 0 goodsservices that gov consumes in providing public services c publicly owned capital which have long lifetimes 0 salaries of gov employees o excludes transfer payments 0 includes fed state and local gov purchases 0 net exports Xn I only items madeproduced in US I spending toward imports o substracted from total exports GDPC lgGXn Nominal GDP vs Real GDP qty of goods produced affect standard of living not the price of goods nominal GDP measured in terms of price level time of measurement GDP unadjusted for inflation real GDP measured in terms of price level base period GDP that s adjusted for inflation Economic Growth definition increase in real GDP occurring over time or increase in real GDP per capita occurring over time real GDP per capita W calculated as rate of growth per quarteryr 0 real GDP per capita superior for figuring out standard of living 0 real GDP more useful for expansion of military potential used unless specified othenNise growth as a goal 0 expansion of total output relative to pop increase real wages and incomes which leads to a higher standard of living 0 econs experiencing growth are better meeting indiv s needs undertake new programs alleviate poverty help environ 0 growth lessens burden of scarcity arithmetic of growth 0 rule of 70 tells time it would take for some measure to double I Ofyrs to double GDP Growth in US real GDP 19502009 0 increased sixfold o 32 per year Growth in US real GDP per capita 0 increased more than threefold o 2 per year 70 annual rate of growth Determinants of Growth six factors grouped as supply demand and efficiency factors 0 supply factors physical ability of econ to expand I increase in qty and quality of natural resources I increase in qty and quality of human resources I increase in supplystock of capital goods I improvements in tech o demand factor I to achieve increased prod potential created by supply factors households businesses and gov must purchase econ s expanding output goals 0 efficiency factor I to reach full prod potential econ must achieve efficiency and full employment 0 productive and allocative efficiency Production Possibilities Analysis 0 growth and prod possibilities 0 indicates various max combos of prods econ can produce wfixed qty of natural human and capital resources and tech knowledge I improvement in any one of these factors pushes PP curve outward I increase in total spending required D factor I need lease cost prod and optimal location on curve for resources to make max possible dollar contribution to total output E factor 0 inputs and productivity 0 society can increase output by I increasing inputs of resources I increase productivity of those inputs 0 labor productivity real output per hour of work I real GDP hours of work gtlt labor productivity I labor force participation rate of workingage pop actually in labor force Accounting for Growth 0 growth accounting bookkeeping of the supplyside elements that contribute to changes in real GDP 0 labor inputs vs labor productivity 0 5 factors that explain changes in productivity growth rates I tech advance 0 largest contributor to productivity growth 0 40 of growth 0 includes notjust new tech but managerial methods and forms of business org I amount of capital each worker has to work with 0 explains about 30 of growth 0 makes labor more productive 0 key determinant amount of capital goods available I edu and training 0 15 of growth 0 human capital knowledge and skills that make workers productive 0 includes human capital and on the job training I econs of scale and improved resource allocation 0 15 of econ growth o markets have increased in size over time allowing firms to increase output and achieve advantages associated with size 0 improved resource allocation workers have increased productivity 0 decrease in discrimination has lead members of these groups to higher efficiency jobs 0 institutional structures that promote growth I strong property rights I patents and copyrights I efficient financial institutions I free trade I comp market system 0 other factors I overall socialculturalpolitical env of US I virtually no socialmoral taboos on prod and material progress in US Rise in Average Rate of Productivity Growth 0 productivity growth important bc real output real income and real wages linked to labor productivity econ s income per hour to output per hour reasons for rise in av rate of productivity 0 microchip and IT 0 new firms and increased returns I startup firms new firms focused on creating and introducing particular new productsemploying specific news proddistrib methods I increasing returns experienced by successful new firms firm s output increases by larger than increase in its inputs 0 boosts labor productivity and lowers perunit prod costs 0 econs of scale 0 sources of increasing returns and econs of scale 0 more spec inputs spreading of development costs simultaneous consumption network effects learning by doing 0000 0 global comp o implications for growth 0 all factors listed help achieve econ growth 0 fluctuations do occur bc demand factors cause real output to periodically deviate above and below growth trend 0 growth of US labor force may be reducing o skepticism about longevity o wait and see method o wonder if factors are profound to produce longterm growth of productivity and real GDP ls Growth Desirable and Sustainable o antigrowth view 0 growth and industrialization pollution o hasn t solved socioeconomic problems 0 may promote better living but not good life 0 doubt sustainability o in defense of growth 0 path to increased material abundance 0 improved infrastructure 0 may be only realistic way to reduce poverty 0 sustainable bc most natural resource prices have dropped
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