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EconomicGrowth

EconomicGrowth

     An increase in real GDP occurring over some period.
     An increase in real GDP per capita occurring over some period.
     Economic growth is calculated as a percentage rate of growth per
     quarter or per year.
     Real GDP per capita= Real GDP/size of the population. That compared
     with the values of the previous period are used to determine economic
     growth in a country.
     The growth of real GDP is more useful for measuring expansion of
     military potential or political preeminence.
     The growth of real GDP per capita is more useful for comparing living
     standards
     Economic growth can only occur when BOTH AS and AD increase

Growth as a goal
Economic growth is a goal because if total output increases relative to the
population, real wages will increase and standards of living will therefore
increase.
             GROWTH LESSENS THE BURDEN OF SCARCITY
Economic goals are more easily attained and society can take on new
endeavors. However there will always be scarcity present in the world. No
matter what we, as humans, do to satisfy the current wants of people, their
hunger will only grow to greater things.

Arithmetic as a goal

     Rule of 70: Approximate number of years required to double real GDP =
     70 / annual percentage rate of growth
     Example: A 3% annual rate of growth will double real GDP in about
     23years: (70 / 3) = 23
     Alsoworks for estimating how long it will take a price level to double at
     various % rates of inflation or interest
     Often times the rule of seventy does not project what is really going to
     happen in the future. Because inflation rates change, annual checks on
     the inflation rates are done very two years. The rule of 70 only helps us
     have a sense of time for what is going to happen in the near or distant
     future.
Main sources of growth
Two ways to increase real output and income.

    Increase inputs of resources (ex: land, labor, capital, and entrepreunial
    resources)
    Increase productivity of those inputs (ex: improved health, training,
    education, and motivation of workers)
    About one-third of US growth comes from more inputs, while the
    remaining two-thirds results from improved productivity.


Growth in theUnitedStates

    Between 1950 and 2005 real GDP in the United States increased about
    6 fold as well as the U.S. population.
    Real GDP grew at an annual rate of about 3.5% between 1950 and
    2005.
    Real GDP per capita increased 2.3% per year over that time. However,
    merely quantitative values fail to provide the whole picture. Thus, we
    must qualify the real numbers in several ways.
       o Improved products and services: as the rate of U.S. GDP growth do
          not account for the improvements in products and services, they
          understate the growth of economic well-being.
       o Added leisure: As standard work week has been shortened, the raw
          growth rate understate that gain in economic well-being.
       o Other impacts: If growth debases the physical environment, the
          bare growth overstate the gains in well-being.



Relativegrowthrates

    In the past half-century, USA's economic growth has been falling behind
    Japan, Germany, Canada, Italy and France.

    More recently, USA's growth has started to rev up, with the growth rate
    exceeding those of Germany and Japan.

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Economic growth

  • 1. EconomicGrowth EconomicGrowth An increase in real GDP occurring over some period. An increase in real GDP per capita occurring over some period. Economic growth is calculated as a percentage rate of growth per quarter or per year. Real GDP per capita= Real GDP/size of the population. That compared with the values of the previous period are used to determine economic growth in a country. The growth of real GDP is more useful for measuring expansion of military potential or political preeminence. The growth of real GDP per capita is more useful for comparing living standards Economic growth can only occur when BOTH AS and AD increase Growth as a goal Economic growth is a goal because if total output increases relative to the population, real wages will increase and standards of living will therefore increase. GROWTH LESSENS THE BURDEN OF SCARCITY Economic goals are more easily attained and society can take on new endeavors. However there will always be scarcity present in the world. No matter what we, as humans, do to satisfy the current wants of people, their hunger will only grow to greater things. Arithmetic as a goal Rule of 70: Approximate number of years required to double real GDP = 70 / annual percentage rate of growth Example: A 3% annual rate of growth will double real GDP in about 23years: (70 / 3) = 23 Alsoworks for estimating how long it will take a price level to double at various % rates of inflation or interest Often times the rule of seventy does not project what is really going to happen in the future. Because inflation rates change, annual checks on the inflation rates are done very two years. The rule of 70 only helps us have a sense of time for what is going to happen in the near or distant future.
  • 2. Main sources of growth Two ways to increase real output and income. Increase inputs of resources (ex: land, labor, capital, and entrepreunial resources) Increase productivity of those inputs (ex: improved health, training, education, and motivation of workers) About one-third of US growth comes from more inputs, while the remaining two-thirds results from improved productivity. Growth in theUnitedStates Between 1950 and 2005 real GDP in the United States increased about 6 fold as well as the U.S. population. Real GDP grew at an annual rate of about 3.5% between 1950 and 2005. Real GDP per capita increased 2.3% per year over that time. However, merely quantitative values fail to provide the whole picture. Thus, we must qualify the real numbers in several ways. o Improved products and services: as the rate of U.S. GDP growth do not account for the improvements in products and services, they understate the growth of economic well-being. o Added leisure: As standard work week has been shortened, the raw growth rate understate that gain in economic well-being. o Other impacts: If growth debases the physical environment, the bare growth overstate the gains in well-being. Relativegrowthrates In the past half-century, USA's economic growth has been falling behind Japan, Germany, Canada, Italy and France. More recently, USA's growth has started to rev up, with the growth rate exceeding those of Germany and Japan.