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Chapter 7

Chapter 7 – Production and Growth.docx

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Bridget O' Shaughnessy

thEconomics Textbook Notes February 6 2012Chapter 7Production and GrowthThe average person in a rich country has an income more than ten times as high as the average person in a poor countryAn economys GDP measures both the total income earned in the economy and the total expenditure on the economys output of goods and servicesAlthough imperfect the level of real GDP is a good gauge of economic prosperity and the growth of real GDP is a good gauge of economic progressLong run determinants of the level and growth of real GDPthree steps 1 Examine international data on real GDP per sondata will give some sense of how much the level and growth of living standards vary around the world 2 Example the role of productivitythe amount goods and services produced for each hour of a workers time 3 Consider the link between the productivity and the economic policies that a nation pursuesProductivityWhy productivity is so important Productivity the quantity of goods and services produced from each hour of a workers timeGDP measuresThe total income earned by everyone in the economy The total expenditure on the economys output of goods and servicesHow productivity is determinedPhysical capital per worker Physical capital also known as capital it is the stock of equipment and structures that are used to produce goods and servicesInputs used to produce goods and serviceslabor capital etc are called the factors of production Capital is an input into the production process that in the past was an output from the production processHuman capital per worker Human capital the knowledge and skills that workers acquire through education training and experience
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