FIN 34220 Lecture Notes - Lecture 7: Aggregate Demand, Potential Output
Document Summary
The sources of growth: a rough estimate for the 1980s. Let"s think whether or not there are policies that could make us grow more quickly and whether or not we want to pursue those policies. One way: increase the participation rate of people who are already of working age who are interested in working. Lower the minimum working age or taking the cap off the age people can work. Remove barriers that prevented people from working. Speed up the allocation of movement in the economy between industries. Problem: just having more people isn"t what would bring prosperity. There"s a distinction between gdp growing and gdp per person/capita growing. You can grow gdp but it could decrease. So labor: not much we can do. Want policies to invest in new capital equipment which would raise capital stock which would raise gdp.
