Economic Growth

HideShow resource information
Economic Growth
Sustained expansion of production possibilities measured as the increase in Real GDP over a given period
1 of 15
Calculate growth rate
(Real GDP current year - Real GDP previous year) / Real GDP previous year * 100
2 of 15
Real GDP per capita grows when...
Real GDP grows faster than population
3 of 15
Rule of 70
The number of years it takes for the level of any variable to double is approx. 70/annual % growth rate
4 of 15
Average growth rate 1912-2012
1.6% a year
5 of 15
Model to determine potential GDP
Aggregate production function and aggregate labour market
6 of 15
Growth of potential GDP
Growth of supply of labour, growth of labour productivity
7 of 15
Population growth
Increases potential GDP but decreases potential GDP/hour of labour
8 of 15
Key to increasing living standard is
Increase in labour productivity
9 of 15
Preconditions for labour productivity growth
Incentive system created by firms, markets, property rights and money
10 of 15
Labour productivity growth caused by
Physical capital growth, human capital growth, technological advances
11 of 15
Classical Growth Theory
Growth of real GDP/capita is temporary. Population explosion will decrease real GDP/capita and we will return to primitive standard of living
12 of 15
Neoclassical Growth Theory
Real GDP/capita grows because technological change induces saving and investment. No population explosion because increasing opportunity cost for women to have children
13 of 15
New Growth Theory
Perpetual motion economy. People want better living standards, which creates an incentive to perpetual innovation
14 of 15
Policies for faster growth
Saving, Research and Development, Education, International aid to developing nations, International trade
15 of 15

Other cards in this set

Card 2


Calculate growth rate


(Real GDP current year - Real GDP previous year) / Real GDP previous year * 100

Card 3


Real GDP per capita grows when...


Preview of the front of card 3

Card 4


Rule of 70


Preview of the front of card 4

Card 5


Average growth rate 1912-2012


Preview of the front of card 5
View more cards


No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Economic Growth resources »