ECN 204 Chapter Notes - Chapter 7: Financial Market, Free Trade, Human Capital

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Incomes and growth around the world: there are vast differences in living standards around the world, great variation in growth rates across countries. Country rankings can change over time (countries that are poor are not doomed to poverty forever and rich countries are not always rich forever) A country"s standard of living depends on its ability to produce. Productivity = average quantity of goods & services produced each hour of a worker"s time. Y = real gdp = quantity of output produced. When nation"s workers are very productive, real gdp is high and incomes are high. As productivity grows rapidly, so do living standards. K = physical capital (structures and equipment used to produce goods and services) Productivity is higher when average worker has more capital (machines, Increase in k/l causes an increase in y/l (productivity) Increase in h/l (human capital) causes increase in y/l (productivity) N = natural resources (inputs in production nature adds; land, mineral)

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