Class Notes (836,290)
Canada (509,749)
Economics (965)
ECO1302 (97)
Brett F. (4)
Lecture

Chapter 6- Goal of Economic Growth.docx

3 Pages
131 Views
Unlock Document

Department
Economics
Course
ECO1302
Professor
Brett F.
Semester
Winter

Description
Chapter 6: Goal of Economic Growth Economic Growth:  Most economists consider that the long­run rate of economic growth (REAL  GDP) is determined by aggregate supply or real variables (i.e. labour, capital and  technology)  Short­run fluctuations above or below ‘potential GDP’ are attributed to variations  n the level of aggregate demand  Some economists (Real Business Cycle Theorists) deny any role for ‘demand­side  variables’.. The Capacity to produce: Potential GDP and the Production function  Potential GDP is what the economy could produce if its labour force and other  resources were fully employed (under normal conditions).  An economy’s production function is the mathematical depiction of the  relationship between an economy’s inputs and outputs. It shows the volume of  output that can be produced from given inputs (labour, capital) given the available  technology. The Growth Rate of Potential GDP The growth rate of potential GDP depends on:  Growth rate of the labour force  Growth rate of the nation’s capital stock  The rate of technical progress How is it measured? Labour productivity  labour productivity = total output/total hours  This measures output per hour of work GDP can be expressed as:  GDP = Hours of work x labour productivity The equation above in growth rates is:  Growth rate of potential GDP = Growth rate of labour input + Growth rate of  labour productivity  Example: 3% = 2% + 1%  Is Faster Growth Better?  Faster growth may lead to greater pollution, global warming, crowding.  Greater consumption may not necessarily make people happier.  Growth may drive people to work longer hours.  Faster growth may generate higher inflation, in some cases. Unemployment Rate  Unemployment rate  =  the number of unemployed people, expressed as a  percentage of the labour force  High unemployment is socially wasteful.  Unemployment entails a loss in output for the society as a whole, a loss that can  never be recovered.  Unemployment is a serious personal problem for the unemployed. o Income relinquished o Psychological distress and unhappiness (see the already mentioned 2010 study  by the CSLS)  Unemployment rate is greater for younger and
More Less

Related notes for ECO1302

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit