Economics 1022A/B Chapter Notes - Chapter 22: Potential Output, Real Wages, Business Cycle

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ECON 1022A/B Full Course Notes
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ECON 1022A/B Full Course Notes
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Economic growth expansion of production possibilities measured as the increase in real gdp over a given period. Growth rate annual % change of a variable. Real gdp growth rate = (cid:3041) (cid:3048)(cid:3045)(cid:3045)(cid:3041)(cid:3047) (cid:3045) (cid:3041) (cid:3043)(cid:3045)(cid:3049)(cid:3042)(cid:3048)(cid:3046) (cid:3045) (cid:3041) (cid:3043)(cid:3045)(cid:3049)(cid:3042)(cid:3048)(cid:3046) (cid:3045) (cid:883)(cid:882)(cid:882) Tells us how rapidly the total economy is expanding. Shows potential changes in balance of economic power among nations: does not tell us about standard of living. Real gdp per person (per capita real gdp) real gdp divided by the population. Standard of living depends on this: real gdp per person grows only if real gdp grows faster than the population grows. Real gdp growth rate per person = above formula (sub in real gdp per person) Smoothes out business cycle fluctuations in growth rate of real gdp. Economic growth occurs when real gdp increases + sustained (yr after yr) increase in potential gdp.

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