ECON 1202 Lecture Notes - Lecture 14: Informal Sector, Capital Accumulation
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ECON 1202 Full Course Notes
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Document Summary
Potential gdp- the level of gdp attained when all firms are producing at capacity. Capacity- measured when we take into account the normal workforce and normal working hours. Actual gdp- the measured output of an economy at a given point of time. As you employ more units of capital the marginal productivity of capital is declining. Principal factors driving growth include new ideas, technology, and inventions. The principal factor driving growth is the accumulation of capital a downward sloping line. Catching up growth- growth due to capital accumulation. Cutting edge growth- growth of an economy due to new ideas . Informal sector: volunteer work and under the table payment. Shortcomings of gdp as a measure of wellbeing. Discrepancies in official statistics can be an indicator of how large the informal economy is. Underground economy in us in 2009 was about 8% In developed nations average share of informal economy is relatively low.
