Economic Growth is a sustained increase in Real GDP/per capita over time.
We want our economy to grow because it leads to economic prosperity. It strengthens our over all well being, and it reduces scarcity.
Conditions For Growth
Rule of Law
Economic Freedom
Trade
Low inflationary Expectations
Willingness to sacrifice consumption in order to grow
Physical Capital:
Consists of tools, machinery, factories
PC is the product of investment. Investment is very sensitive to interest rates and unexpected rates of return.
It takes capital to make capital.
Technology and Productivity
Research and development yield increases in technology.
Productivity is the output per worker. More productivity equals more economic growth.
Human Capital
Human are the most important resource for a nation. Education, economic freedom, the right to acquire private property, stable food and water, and access to technology all contribute.
Obstacles to Economic Growth:
High inflation
Economic instability'
Absence if rule of law
Negative Incentivess
Lack of Savings
Failure to maintain existing capital
Crowding Out of Investment
Increased income inequality
Restricitons on Free Int'l Trade
Example of Economic Growth:
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ReplyDeleteI like how your notes are very detailed and the graph helps me understand more of what economic growth looks like. I would just like to add that more technology on hands equals an increase in productivity and more productivity increases economic growth.
ReplyDeleteThe notes are amazing in the sense that they are simple and to the point. It helped me reassure myself on what I learned, such as the fundamental idea of Human Capital being a necessity for a country to grow.
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