MGEB06H3 Lecture Notes - Lecture 3: Human Capital, Longrun, Good Governance

25 views2 pages
Macroeconomics Notes: Lecture Three (Chapter Nine) PART2:
Why does growth rate differ?
Savings and investment spending- some countries are increasing their stock of physical
capital much more quickly than others thought high rate of investment spending
Domestic savings- savings done by households and government
Output increases wen the physical capital increases
Foreign saving- savings that come from foreigners’ example, borrowing from abroad
(foreign has played an important role in the long run economic growth of some
countries such as, Canada)
Countries that invest a large share of their GDP are able to do so because they have a
high domestic savings.
Education:
The output goes up when there is an increase in human capital
One way to build human capital is through education. Countries tend to grow faster
when they spend higher portion of GDP on education
Research and development:
This is the spending to create and implement new technologies
This is an important source of TFP growth
Countries that spend a high portion of GDP on R&D tend to enjoy higher TFP
growth and real GDP growth because they are likely to experience technologies
advancement
The role of government in promoting economic growth
Looking at how government policies could promote or hinder economic growth
Government policies: Government policies can foster economic growth in 4 different
ways:
1. Lower the cost of building infrastructure through the provision of subsidies
Government play an important role in building infrastructure ex. Roads,
power lines
Poor infrastructure ex. Bad power grid is a major obstacle to economic growth
2. Making education less expensive by giving free or supported education
Most of an economy’s human capital is the result of government spending on
education
3. Lower the cost of undertaking research and development by giving subsidies (or tax
credit) to R&D
Government helps promote R&D in the business sector through different
programs and initiative
4. Maintain a well-functioning financial system:
A healthy and well-functioning financial system helps to channel funds from
savers to borrowers so that those who have profitable investment opportunities
will have the funds needed to finance their investment.
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows half of the first page of the document.
Unlock all 2 pages and 3 million more documents.

Already have an account? Log in

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

Related Questions