Friday, April 22, 2016

Economic Growth

Economic growth
(A percentage rate of growth per quarter)
  • increase in real GDP
  • (or)
  • increase in real GDP per capita
    • real GDP / population, compared to previous quarters 
growth lessens the burden on scarcity 

Rule of 70: provides a mathematical grasp of the effect of economic growth rate changes.
  • Number of years for variable to double = 70 / Annual Growth Rate of the Variable


Why do we see growth in some areas and not in others?

 
Institutions that promote growth
  • strong property rights
  • patents and copyrights
  • efficient financial institutions
  • widespread education
  • free trade
  • competitive market system 
Non-institutional factors

(supply) increase in:
  • quantity and quality of natural resources 
  • quantity and quality of human resources 
  • stock of capital goods 
  • advances in technology     
(demand) increases in:
  • total spending
(efficiency) increase in:
  • allocative efficiency 
  • productive efficiency
Discussion: is growth desirable?