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Transcript of Muenker Econ
technology Capital widening:
Occurs when extra capital is used with an increased amount of labor, but the ratio of capital per worker doesn't change. When this occurs, total production will rise, but productivity (output per worker) is likely to stay the same Capital deepening:
Occurs when there is an increase in the amount of capital for each worker. This often means improvements in technology. Usually leads to improvement of labor productivity as well as increases in total production Physical capital enabling extraction, or improved extraction, of primary products (such as oil drilling or mining) may be important in terms of economic growth since it will increase the quantity of a factor of production In order for meaningful economic growth to occur, insitutional factors must be present and functional Consequences of economic growth Consequences to economic growth can be positive or negative 1) Higher incomes: Higher levels of economic growth can lead to higher GDP per capita 2) Improved economic indicators of welfare: Economic growth leads to higher averages in terms of indicators of welfare Life expectancy
Average years of schooling
Literacy rates 3) Higher government revenues: Increased GDP should see increased government revenues from taxation which allows for the government to (in theory) invest more in social services such as education, healthcare, and infrastructure 4) Creation of inequality: Even if the poor get a little more money, the gap between rich and poor is said to grow, since the rich reveive the majority of the gains 5) Negative externalities and lack of sustainabiilty: Economic growth often leads to pollution or other negative externalities As economies grow, demand for transportation, and energy grow. These demands are met by fossil fuels or other energy sources which often serve as negative externalities for a country Economist Herman Daly coined the phrase "uneconomic growth" which refers to an increase in production at the expense of resources and well being that is worth more than what is being made Sources of economic development Education Healthcare Infrastructure Political Stability