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

Productivity and Growth: Crash Course Economics #6

BE SURE TO SCROLL ALL THE WAY DOWN FOR TUTORING

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!

...AND WE ARE DONE!!!!!! GOOD LUCK!!!!!

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