lecture #3 01/21/2014
Why do some countries grow faster than others?
Put in another way: what are the determinants of a country’s standard of living?
Fact: A country’s standard of living depends on its ability to produce goods and services – in the long run,
consumption has to equal production.
When productivity grows, wages grows.
Physical Capital raises the productivity of workers – workers are more productive if they have tools with
which to work.
Doesn’t technological progress,
a)Canada benefited because it made our capital stock larger, increasing our productivity and therefore
b) It would have been better for Canada to make the investments itself since then it would not have tp pay
back the returns. (e.g: interest and dividend payments) to investors in the US.
Encouraging investments in Human Capital
In Canada, each year of schooling raises a person’s wage, on average, by about 10 percent
Thus, one way the government can enhance the standard of living is to provide schools and encourage the
population to take advantage of them
Describe some forms of private spending that represent consumption, and some forms that represent
Private consumption Private Investment
Going out Education
Luxury goods Health
Describe some forms of government spending that represent consumptio