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Chapter 7

Principles of Macro [Mankiw, Kneebone, McKenzie] - Chapter 7 Notes

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ECON 2020U
Peter Cheung

ECON2020UChapter 7 Notes PRODUCTION AND GROWTHEconomic Growth Around the WorldSome poor countries although capable of growing to meet the standards of rich countries do not grow Why Poor countries real income can be compared to and equal the real income of rich countries over 100 years ago This is because the poor countries did not see the growth that the rich countries saw in this 100 year lapse Productivity Its Role and DeterminantsWhy Productivity is So ImportantProductivitythe quantity of goods and services produced from each hour of a workers time Since the GDP is a measure of the productivity of a nation it draws a strong correlation to that nations economic wellbeing Canadians live better than Nigerians because Canadian workers are more productive than Nigerian workers The Japanese have seen a higher rate of growth than Argentenians because Japan saw a greater rise in productivity How Productivity is DeterminedFactors which determine productivity 1 Physical Capital 2 Human Capital 3 Natural Resources 4 Technological KnowledgePHYSICAL CAPITAL PER WORKER Physical capitalthe stock of equipment and structures that are used to produce goods and services The more tools a worker has to do his work the more productive the worker becomes Capital is a factor of production used to produce all kinds of goods and services including more capital Example A lathe company makes a lathe to sell as a good a woodworker buys this capital to use to make other goodsHUMAN CAPITAL PER WORKER Human capitalthe knowledge and skills that workers acquire through education training and experience Physical capital and human capital are very similar the only difference being tangibility Professors are in a sense workers who produce human capital for use in another labour forceNATURAL RESOURCES PER WORKER Natural resourcesthe inputs into the production of goods and services that are provided by nature such as land rivers and mineral deposits Two forms of natural resources exist renewable and nonrenewable
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