Nicholson- AP MACRO EXAM
ECONOMIC GROWTH AND PRODUCTIVITY - FINAL STUDY RESOURCES
5-10% Economic Growth and Productivity
A. Investment in Human Capital
B. Investment in Physical Capital
C. Research and development, and technological progress
D. Growth Policy
BE SURE TO SCROLL ALL THE WAY DOWN FOR TUTORING
•Five Factors connected to long run economic growth.
•Increase in natural resources (quantity and quality)
•Increase in human resources (quantity and quality)
•Increase in capital goods
•Improvements in technology
•Increase in consumption by households, businesses, and government
•Growth leads to greater prosperity for society.
•Lessens the burden of scarcity.
•Increases the general level of well-being.
Conditions for Growth
•Willingness to sacrifice current consumption in order to grow
•Tools, machinery, factories, infrastructure
•Physical Capital is the product of Investment.
•Investment is sensitive to interest rates and expected rates of return.
•It takes capital to make capital.
•Capital must be maintained.
Technology & Productivity
•Research and development, innovation and invention yield increases in available technology.
•More technology in the hands of workers increases productivity.
•Productivity is output per worker.
More Productivity = Economic Growth
•People are a country’s most important resource. Therefore human capital must be developed.
•Access to technology
Hindrances to Growth
•Economic and Political Instability
–High inflationary expectations
•Lack of Savings
•Excess current consumption
•Failure to maintain existing capital
•Crowding Out of Investment
–Government deficits & debt increasing long term interest rates!
PRACTICE! PRACTICE! PRACTICE!
All the Graphs You "Need" to Know
Aggregate Demand/Aggregate Supply
Currency Exchange Market