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Economic Growth and Productivity

Ap Macroeconomics Presentation

Sam Smith

on 7 April 2011

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Transcript of Economic Growth and Productivity

Economic Growth & Productivity Productivity: Refers to output per worker (where data is available, productivity is defined as output per hour)
For an economy as a whole, productivity is real GDP divided by the number of people working.
Higher productivity arises from increases in physical capital per worker and human capital per worker, as well as technological advances
Higher productivity & output = increase in long-run growth Long Run Economic Growth The sustained upward trend in aggregate output over several decades
LR economic growth is one of the major stated goals for a modern market economy, classical economics and all the schools that stem from it
US has seen a 600% growth in its economy in the 20th century Why's this stuff so important? Growth in productivity increases the nation's standard of living
It enhances our role in the international market;
It provides the discretionary income necessary to finance social/environmental programs
It will ensure the necessary funds to pay for government transfer payments when the baby boomers begin to retire. Changes in Production Government spending & productivity can be used to stimulate investment in technology, innovation, the skills of the labour force and social infrastructure.
Example: an increase in real spending on the transport infrastructure.
Improvements in our transport system would add directly to aggregate demand, but would also provide a boost to productivity and competitiveness.
Similarly, increases in capital spending in education would have feedback effects in the long term on the supply-side of the economy. Using the PPC Expansion or contraction in the factors of production determine the rate of long-run growth in aggregate output

More resources = More production

With more production, the Product Possibility Curve moves right; more goods produced with less tradeoff
With an increase in AD this leads to a stimulated economy in the long run http://www.economicadventure.org/pursuit/game/fedGame.cfm?moduleid=3 Define and explain productivity
What is Long Run Economic Growth?
What is the importance of LR Economic Growth?
What changes production and what is the effect?
What is the purpose of the PPC graph?
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