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Lecture 7

ECO 1102 Lecture Notes - Lecture 7: Candu Reactor, International Monetary Fund, Foreign Portfolio Investment

Course Code
ECO 1102
Octavian Strimbu

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Chapter 7: Producon & Growth Brian To | February 2016
R = Growth Rate | given r = 0.05,
1st year → Y
2nd year → Y
20 th year →Y (1+r)20
Average GDP is not enough, Distribuon is what’s missing (very important to know rich, middle class, & poor)
Why Producvity is so important
Producvity: quanty of goods & services produced from each hour of a worker’s me
oGrowth in Producvity = key determinant of growth in living standards
oFor a country to enjoy high standard of living, it must produce a large quanty of goods & services
If you do not have technology, capital, skills, you cannot produce
How Producvity is Determined (4 things)
1. Physical capital per worker
Physical capital: stock of equipment & structures that are used to produce goods & services
2. Human capital per worker
Human capital: knowledge & skills that workers acquire thru educaon, training, & experience
3. Natural resources
Inputs into producon of goods & services that are produced by nature (i.e. land, rivers, & mineral deposits)
4. Technological knowledge
Societys understanding of best ways to produce goods & services
Af (K1L1H1N1)
-------- K = technological knowledge | L = labour | H = human resources | N = natural
Economic Growth & Public Policy --- What can raise producvity & living standards?
Importance of Saving & Investment
Diminishing Returns & Catch-Up E>ect
Investment from Abroad
Health & Nutrion
Property Rights & Polical Stability
Free Trade
Research & Development
Populaon Growth
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