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
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Economic Growth
•Five Factors connected to long run economic growth.
•Supply Factors:
•Increase in natural resources (quantity and quality)
•Increase in human resources (quantity and quality)
•Increase in capital goods
•Improvements in technology
•Demand Factors:
•Increase in consumption by households, businesses, and government
Why Grow?
•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
•Saving
•Trade
Physical Capital
•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
Human Capital
•People are a country’s most important resource. Therefore human capital must be developed.
•Education
•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!
•Trade Barriers
PRACTICE! PRACTICE! PRACTICE!
All the FORMULAS You "Need" to Know
All the Graphs You "Need" to Know
Basic Graphs
http://www.reffonomics.com/TRB/chapter30/BasicConceptGraphs7.swf
Aggregate Demand/Aggregate Supply
http://www.reffonomics.com/TRB/chapter30/Macro10.swf
Money Market
http://www.reffonomics.com/TRB/chapter30/moneymarketgraph12.swf
Loanable Funds
http://www.reffonomics.com/TRB/chapter30/loanablefundsmarket12.swf
Currency Exchange Market
http://www.reffonomics.com/TRB/chapter30/currencyexchangemarket12.swf
Phillip's Curve
http://www.reffonomics.com/TRB/chapter30/phillipscurve12.swf
TUTORING