EC140 Chapter Notes - Chapter 26: Production Function, Knowledge Transfer, Diminishing Returns
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EC140 Full Course Notes
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Sustained increases in y* are a more powerful method of raising material living standards than the removal of recessionary gaps. Even small diferences in annual growth rates can result in large changes in living standards ater many years. Consider gdp, per capita gdp, and gdp per worker. Addressing poverty and income inequality (many people do not share directly in the growth but redistribuion is easier in a growing economy. Growth is oten encouraged by increasing investment and saving which requires less consumpion. Growth usually involves the displacement of some irms and workers. Eg: the process of economic growth renders some machines obsolete and also leaves the skills of some workers obsolete. Sources of economic growth: growth in the labour force: populaion or increases in the fracion of the populaion, growth in human capital: refer to the set of skills, formal educaion or the job-training.
