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ECON 2010 Prin Macroeconomics Chapter 10 Notes

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ECON 2010

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1Chapter 10IEconomic growth the Financial SystemBusiness CycleaBusiness cyclealternating periods of economic expansioneconomic recessioniConsidered a natural ebbflow for most economiesWhile the long term trend may show growth the rate is not constantiiThe typical pattern entails a growth cycle that eventually gets too hot followed by a pullback phaseiiiOutside events such geopolitical forces natural disastersother noneconomic interruptions can influence the cycleIILongRun Economic GrowthaLongrun economic growththe process by which rising productivity increases the average standard of living2bCalculating growth ratesthe rule of 70 if the growth rate is 10 divide 70 by 10GDP would double in 7 yearscWhat determines the rate of longrun growthiNumerous factors will influence long run growth political socialeconomiciiThe ideal environment is one having political stability a strong legal system investmenta population eager for growthprogressiiiThose nations or states marked by political turmoil corruption war authoritarian governments or state planned economies generally experience lower standards of living1Investors shun these environmentscapital development goes elsewhereivSuch slow growth economies do not sustain the population with necessary infrastructure health careeducationdDeterminates of long term growthiCapital labortechnological factors will work to improve economic growthiiLabor productivitythe quantity of goodsservices that can be produced by one worker or by one hour of work1Key element of factors2Increases in capital per workerimproved technology yield higher levels of productivityiiiCapitalthe resulting product of investment used to produce other goodsservicesMay take the form of factories plants equipment or other elements allowing for productionivIncreasing technology improves the output of workercapital interactions
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