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Chapter 14

Chapter 14 Economic Growth, Productivity, and Living Standards

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ECON 1100
Eveline Adomait

Chapter 14: Economic Growth, Productivity, and Living Standards Monday, March 25, 2013 6:42 PM 14.2 Why "Small" Differences in Growth Rates Matter Definitions Power of Compound Growth- the fact that seemingly small differences in growth rates, maintained over long periods, will produce large differences in magnitude Compound Interest- the payment of interest not only on the original deposit but on all previously accumulated interest Rule of 72- a rule of thumb stating that to find the number of years it takes a magnitude to double when it is growing at a constant rate, divide 72 by the growth rate 14.4 The Determinants of Average Labour Productivity Definitions Diminishing Returns to Capital- if the amount of labour and other inputs employed is held constant, then, the greater the amount of capital already in use, the less an additional unit of capital will tend to add to production Dutch disease- the tendency in an economy with a booming natural resource sector for the manufacturing sector to decline Entrepreneurship- behavior that results in new products, services, technological processes, or organizational innovations that are productivity enhancing 14.5 The Productivity Slowdown and Real Wage Stagnation Definitions Technological Depletion Hypothesis- the theory that the productivity slowdown after 1973 was due to the depletion of the backlog of technological advances made but not i
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