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CA (170,000)
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ECON (800)
ECON 1010 (200)
Chapter 22.1-3

ECON 1010 Chapter 22.1-3: Chapter 22.1-3 Economic Growth


Department
Economics
Course Code
ECON 1010
Professor
Simin Seury
Chapter
22.1-3

This preview shows pages 1-3. to view the full 9 pages of the document.
!"#$%!&!
The$Basics$of$Economic$Growth
Economic$Growth$'($)*+$+,-./('0/$01$-20345)'0/$-0(('6'7')'+(
-
8$2.-'3$-.5+$01$+50/09'5$:20;)*$5./$)2./(1029$.$-002$/.)'0/$'/)0$.$2'5*$0/
-
Calculating$Growth$Rates
<+$+,-2+(($.$growth$rate$.($)*+$.//4.7$-+25+/).:+$5*./:+$01$.$
=.2'.67+$%)*+$5*./:+$'/$)*+$7+=+7$+,-2+((+3$.($.$-+25+/).:+$01$)*+$
'/')'.7$7+=+7
The$Growth$Rate$for$Real$GDP:
§
For$example:
>+.7$?@A$:20;)*$2.)+$B$F"G!E$6'77'0/$%F"!EE$6'77'0/$D$
F"!EE$6'77'0/$B$"E$-+25+/)
H
§
I*+$:20;)*$2.)+$01$2+.7$?@A$)+77($4($$*0;$2.-'37C$)*+$total%+50/09C$'($
+,-./3'/:
I*'($9+.(42+$'($4(+3$102$)+77'/:$4($.604)$-0)+/)'.7$5*./:+($'/$)*+$
6.7./5+$01$+50/09'5$-0;+2$.90/:$/.)'0/(
§
The$Standard$of$living$K.L.$-+2$5.-').7$>+.7$?@AM$N$;*'5*$'($2+.7$?@A$
3'='3+3$6C$)*+$-0-47.)'0/
O0$)*+$50/)2'64)'0/$01$2+.7$?@A$:20;)*$)*+$5*./:+$'/$()./3.23$01$
7'='/:$3+-+/3($0/$:20;)*$2.)+$01$2+.7$?@A
§
§
Real$GDP$per$Person$growth$rate
O)./3.23$01$P'='/:$?20;)*$>.)+$B$>+.7$?@A$-+2$-+2(0/$5422+/)$
C+.2$%>+.7$?@A$-+2$-+2(0/$-2+='04($C+.2$D$>+.7$?@A$-+2$-+2(0/$
-2+='04($C+.2$,$"EE
§
For$Example:
>+.7$?@A$-+2$-+2(0/$:20;)*$2.)+$B$F!##!!$%F!EEEE$D$
F!EEEE$,$"EE$B$QRS$-+25+/)
H
§
I*+$:20;)*$2.)+$01$2+.7$?@A$-+2(0/$5./$.7(0$6+$5.7547.)+3$
K.-20,RM$6C$(46)2.5)'/:$)*+$-0-47.)'0/$:20;)*$2.)+$1209$)*+$2+.7$
?@A$:20;)*$2.)+
§
-
Economic$Growth$vs.$Business$Cycle$Expansion
>+.7$?@A$5./$'/52+.(+$102$);0$3'()'/5)$2+.(0/
I*+$+50/09C$9':*)$6+$2+)42/'/:$)0$1477$+9-70C9+/)$'/$./$
+,-./('0/$-*.(+$01$)*+$64('/+(($5C57+$02$potential%?@A$9':*)$6+$
'/52+.('/:
§
I*+$2+)42/$01$1477$+9-70C9+/)$'/$)*+$+,-./('0/$-*.(+$01$)*+$64('/+(($
5C57+$'($/0)$+50/09'5$:20;)*
T)$'($U4()$).L'/:$4-$)*+$(7.5L$)*.)$2+(47)+3$1209$.$-2+='04($
2+5+(('0/
§
I*+$+,-./('0/$01$-0)+/)'.7$?@A$'($+50/09'5$:20;)*
§
V50/09'5$:20;)*$'($)*+$+,-./('0/$01$-20345)'0/$-0(('6'7')'+(
T)$'($./$04);.23$90=+9+/)$01$)*+$AAW
§
I*+$:20;)*$2.)+$01$-0)+/)'.7$?@A$9+.(42+($)*+$-.5+$01$+,-./('0/$01$
-20345)'0/$-0(('6'7')'+($./3$(900)*+($04)$)*+$64('/+(($5C57+$
1745)4.)'0/($'/$)*+$:20;)*$2.)+$01$2+.7$?@A
-
The$Magic$of$Sustained$Growth
O4().'/+3$:20;)*$01$2+.7$?@A$-+2$-+2(0/$5./$)2./(1029$.$-002$(05'+)C$
'/)0$.$;+.7)*C$(05'+)C
)*+$2+.(0/$6+'/:$'($6+5.4(+$+50/09'5$:20;)*$'($7'L+$509-04/3$
'/)+2+()
§
Compound$Interest
O4--0(+$)*.)$C04$-4)$F"EE$'/$)*+$6./L$./3$+.2/$.604)$!$-+25+/)$
.$C+.2$01$'/)+2+()$0/$')
§
81)+2$0/+$C+.2$C04$*.=+$F"E!$./3$'1$C04$7+.=+$)*.)$F"E!$'/$)*+$
6./L$102$./0)*+2$C+.2N$C04$+.2/$!$-+25+/)$0/$)*+$02':'/.7$F"EE$
./3$)*+$F!$C04$:.'/+3
V.2/'/:$'/)+2+()$0/$'/)+2+()H
§
X0;$70/:$;'77$')$).L+$102$)*+$'/')'.7$ 3+-0(')$)0$30467+$)0$F&EEY
I*+$./(;+2$'($-20='3+3$'/$the$rule$of$70 ;*'5*$().)+($)*.)$
)*+$/496+2$01$C+.2($')$).L+($102$)*+$7+=+7$01$./C$=.2'.67+$)0$
30467+$'($.-20,R$ZE$3'='3+3$6C$)*+$.//4.7$-+25+/).:+$
:20;)*$2.)+$01$)*+$=.2'.67+
For$example:$ZE$3'='3+3$![$+\4.7($"#$N$)*+2+102+$')$
;0473$).L+$"#$C+.2($102$F"EE$)0$)42/$'/)0$F&EE
®
H
§
-
Applying$the$rule$of$70
I*+$247+$01$ZE$.--7'+($)0$./C$=.2'.67+N$(0$')$5./$.--7C$)0$2+.7$?@A$-+2$
-+2(0/
Figure$22.3$(*0;($)*+$30467'/:$)'9+$102$:20;)*$2.)+($01$"$-+25+/)$-+2$
C+.2$)0$"&$-+25+/)$-+2$C+.2
]04$5./$(++$)*.)$>+.7$?@A$-+2$-+2(0/$30467+($'/$ZE$C+.2($KZED"M$%
./$.=+2.:+$*49./$7'1+$(-./$%'1$)*+$:20;)*$2.)+$'($"$-+25+/)$-+2$
C+.2N$')$30467+($)0$^!$-+25+/)$$'1$)*+$:20;)*$2.)+$'($&$-+25+/)$-+2$
C+.2N$./3$'/$"E$C+.2($'1$)*+$:20;)*$2.)+$'($Z$-+25+/)$-+2$C+.2
§
<+$5./$4(+$)*+$>47+$01$ZE$)0$./(;+2$)*'($\4+()'0/$.604)$+50/09'5$
:20;)*
For$example:$'/$&E"#$_./.3'./$2+.7$?@A$-+2$-+2(0/$;.($.-20,R$#$)'9+($
)*.)$01$_*'/.
_*'/.`($2+5+/)$:20;)*$2.)+$01$2+.7$?@A$-+2$-+2(0/$;.($"E$-+25+/)$
-+2$C+.2
§
T1$)*+$:20;)*$2.)+$;.($2+9.'/$4/5*./:+3N$*0;$70/:$;0473$')$).L+$
_*'/.`($2+.7$?@A$-+2$-+2(0/$)0$2+.5*$)*.)$01$_./.3.$'/$&E"#Y
§
I*+$./(;+2$'($-20='3+3$6C$)*+$247+$01$ZEN$'($"#$C+.2(
§
_*'/.`($2+.7$?@A$-+2$-+2(0/$30467+($'/$Z$C+.2($KZE$D$"EMN
§
T)$30467+($.:.'/$)0$#$)'9+($')($5422+/)$7+=+7$'/$./0)*+2$Z$C+.2(N$(0$
.1)+2$"#$C+.2($01$:20;)*$.)$"E$-+25+/)$.$C+.2N$_*'/.`($2+.7$ ?@A$
-+2(0/$'($#$)'9+($')($5422+/)$7+=+7$./3$+\4.7($)*.)$01$_./.3.$'/$
&E"#
§
-
Long$Term$Growth$Trends
-]04$*.=+$U4()$(++/$)*+$-0;+2$01$+50/09'5$:20;)*$)0$'/52+.(+$'/509+(
-8)$.$"$-+25+/)$:20;)*$2.)+$')$).L+($.$*49./$7'1+$(-./$)0$30467+$)*+$()./3.23$
01$7'='/:
-J4)$.)$.$Z$-+25+/)$:20;)*$2.)+N$)*+$()./3.23$01$7'='/:$30467+($+=+2C$3+5.3+
How$Potential$GDP$grows
-V50/09'5$:20;)*$05542($;*+/$2+.7$?@A$'/52+.(+(
-J4)$.$0/+$(*0)$2'(+$'/$2+.7$?@A$02$.$2+50=+2C$1209$2+5+(('0/$'($/0)$+50/09'5$
:20;)*
-V50/09'5$:20;)*$'($(4().'/+3N$C+.2%.1)+2$C+.2$'/52+.(+$'/$potential?@A
-What$Determined$Potential$GDP?
P.6042N$7./3$N$5.-').7$./3$+/)2+-2+/+42(*'-$-20345+$2+.7$?@AN$./3$)*+$
-20345)'=')C$01$)*+$1.5)02($01$-20345)'0/$3+)+29'/+($)*+$\4./)')C$01$
2+.7$?@A$)*.)$5./$6+$-20345+3
I*+$\4./)')C$01$7./3$'($1',+3N$./3$0/$./C$:'=+/$3.C$)*+$\4./)')'+($01$
+/)2+-2+/+42'.7$.6'7')C$./3$5.-').7$.2+$.7(0$1',+3$./3$)*+'2$-20345)'=')'+($
.2+$:'=+/
I*+$\4./)')C$01$7.6042$+9-70C+3$'($)*+$0/7C$variable%1.5)02$01$
-20345)'0/
A0)+/)'.7$?@A$'($)*+$7+=+7$01$2+.7$?@A$;*+/$)*+$\4./)')C$01$7.6042$
+9-70C+3$'($)*+$1477$+9-70C9+/)$\4./)')C
I0$3+)+29'/+$-0)+/)'.7$?@A$;+$4(+$.$903+7$;')*$);0$509-0/+/)(a
§An$Aggregate$production$function
H<*+/$C04$()43'+3$)*+$7'9')($)0$-20345)'0/$'/$5*.-)+2$&$
KAAWM$C04$7+.2/+3$)*.)$.$-20345)'0/$-0(('6'7')C$120/)'+2$'($
)*+$604/3.2C$6+);++/$)*+$5096'/.)'0/($01$:003($./3$
(+2='5+($)*.)$5./D5.//0)$6+$-20345+3
H<+$/0;$700L$.)$)*+$AAW$102$)0;$(-+5'.7$ b:003(b$a$2+.7$?@A$
./3$)*+$\4./)')C$01$7+'(42+$)'9+
®I*'/L$01$2+.7$?@A$.($.$/496+2$01$6':$(*0--'/:$01$6':$
(*0--'/:$5.2)(N$+.5*$5.2)$50/).'/($(09+$01$+.5*$
3'11+2+/)$:003($./3$(+2='5+($-20345+3
®I*'/L$01$7+'(42+$ )'9+$.($)*+$/496+2$01$*042($/0)$
(-+/)$;02L'/:N$+.5*$7+'(42+$*042$50473$6+$(-+/)$
;02L'/:
T1$;+$(-+/)$.77$042$)'9+$).L'/:$7+'(42+N$;+$
;0473$30$/0$;02L$./3$2+.7$?@A$;0473$6+$c+20
I*+$902+$7+'(42+$;+$102:0N$)*+$:2+.)+2$01$)*+$
\4./)')C$01$7.6042$;+$(4--7C$./3$)*+$:2+.)+2$
\4./)')C$01$2+.7$?@A$'($-20345+3
<+$4(+$042$90()$-20345)'=+$*042($1'2()N$./3$.($
902+$*042($.2+$;02L+3N$)*+(+$*042($6+509'/:$
'/52+.('/:7C$7+(($-20345)'=+
HI*+$aggregate$production$function$'($)*+$2+7.)'0/(*'-$)*.)$
)+77($4($*0;$2+.7$?@A$5*./:+($.($)*+$\4./)')C$01$7.6042$
5*./:+($;*+/$.77$0)*+2$'/174+/5+($0/$-20345)'0/$2+9.'/($
)*+$(.9+
®8/$'/52+.(+$'/$)*+$\4./)')C$01$7.6042$K9+./($$
3+52+.(+$'/$7+'(42+$)'9+M$62'/:($.$90=+9+/)$.70/:$
)*+$-20345)'0/$14/5)'0/$./3$./$'/52+.(+$'/$2+.7$?@A
§An$Aggregate$labour$market
HT/$9.520+50/09'5($;+$-2+)+/3$)*.)$)*+2+$'($0/+$7.2:+$
7.6042$9.2L+)$)*.)$3+)+29'/+($)*+$\4./)')C$01$7.6042$
+9-70C+3$./3$)*+$\4./)')C$01$2+.7$ ?@A$-20345+3
®I0$(++$*0;$)*'($.::2+:.)+$7.6042$9.2L+)$;02L($;+$
()43C$)*+$3+9./3$102$7.6042N$)*+$(4--7C$102$7.6042$
./3$)*+$7.6042$9.2L+)$+\4'7'62'49
HDemand$for$Labour
®T($)*+$2+7.)'0/(*'-$6+);++/$)*+$\4./)')C$01$7.6042$
3+9./3+3$./3$)*+$2+.7$;.:+$2.)+
®I*+$\4./)')C$01$7.6042$3+9./3+3$'($)*+$/496+2$01$
*042($*'2+3$6C$.77$)*+$1'29($'/$)*+$+50/09C$T$.$:'=+/$
-+2'03R
I*'($\4./)')C$3+-+/3($0/$)*+$-2'5+$01$7.6042
®I*+$real$wage$rate$'($)*+$90/+C$;.:+$2.)+$3'='3+3$
6C$)*+$-2'5+$7+=+7
I*+$2+.7$ ;.:+$2.)+$'($)*+$\4./)')C$01$:003($./3$
(+2='5+($)*.)$./$*042$01$7.6042$+.2/(
T)$50/)2.()($;')*$)*+$90/+C$;.:+$2.)+N$;*'5*$'($
)*+$$/496+2$01$3077.2($)*.)$./$*042$01$7.6042$
+.2/(
I*+$real%wage%rate%'/174+/5+($)*+$\4./)')C$01$
7.6042$3+9./3+3$6+5.4(+$;*.)$9.))+2($)0$
1'29($'($/0)$)*+$/496+2$01$3077.2($)*+C$-.C$
K90/+C$;.:+$2.)+M$64)$*0;$945*$04)-4)$)*+C$
94()$(+77$)0$+.2/$)*0(+$3077.2(R
®I*+$\4./)')C$01$7.6042$3+9./3+3$increases%.($)*+$
2+.7$;.:+$2.)+$decreases%%)*+$3+9./3$102$7.6042$
542=+$(70-+($30;/;.23$N$;*CY
I*+$./(;+2$7'+($'/$)*+$(*.-+$01$)*+$-20345)'0/$
14/5)'0/
}]04`=+$(++/$)*.)$.70/:$)*+$-20345)'0/$
14/5)'0/$+.5*$.33')'0/.7$$*042$01$7.6042$
'/52+.(+($)*+$2+.7$?@A$6C$(455+(('=+7C$
(9.77+2$.904/)(N$)*'($)+/3+/5C$*.($.$
/.9+a$the$law$of$diminishing$returns$
J+5.4(+$01$3'9'/'(*'/:$2+)42/(N$
1'29($;'77$*'2+$902+$7.6042$0/7C$'1$
2.)+($1.77($)0$9.)5*$)*+$1.77$'/$+,)2.$
04)-4)$-20345+3$6C$)*.)$7.6042
HSupply$of$Labour
®T($)*+$2+7.)'0/(*'-$6+);++/$)*+$\4./)')C$01$7.6042$
(4--7'+3$./3$)*+$2+.7$;.:+$2.)+
®I*+$\4./)')C$01$7.6042$(4--7'+3$'($)*+$/496+2$01$
7.6042$*042($)*.)$.77$*04(+*073($'/$)*+$+50/09C$-7./$
)0$;02L$342'/:$.$:'=+/$-+2'03
I*+$\4./)')C$3+-+/3($0/$)*+$2+.7$;.:+$2.)+
®I*+$real%wage%rate%'/174+/5+($)*+$\4./)')C$01$7.6042$
(4--7'+3$6+5.4(+$;*.)$9.))+2($)0$*04(+$*073($'($/0)$
)*+$/496+2$01$3077.2($)*+C$+.2/$K90/+C$;.:+$2.)+M$
64)$;*.)$)*+C$5./$64C$;')*$)*0(+$3077.2(
®I*+$\4./)')C$01$7.6042$(4--7'+($increases%.($)*+$2+.7$
;.:+$2.)+$increases%-)*+$(4--7C$01$7.6042$542=+$
(70-+($4-;.23
®8)$.$*':*+2$;.:+$2.)+N$902+$-+0-7+$5*00(+$)0$;02L$
./3$902+$-+0-7+$5*00(+$)0$;02L$70/:+2$*042($'1$)*+C$
5./$+.2/$902+$-+2$*042R
HLabour$Market$Equilibrium
®I*+$-2'5+$01$7.6042$'($)*+$2+.7$ ;.:+$2.)+
®I*+$1025+($01$(4--7C$./3$3+9./3$0-+2.)+$'/$7.6042$
9.2L+)($U4()$.($)*+C$30$'/$9.2L+)($102$:003($./3$
(+2='5+($)0$+7'9'/.)+$(*02).:+D(42-74(
®J4)$.$(*02).:+$02$(42-74($'/$7.6042$0/7C$62'/:($.$
:2.34.7$5*./:+$'/$2+.7$;.:+$2.)+
T1$)*+2+$'($.$(*02).:+$'/$7.6042N$)*+$2+.7$;.:+$
2.)+$2'(+($)0$+7'9'/.)+$')
T1$)*+2+$'($.$(42-74($'/$7.6042$)*+2+$'($1.77$'/$)*+$
2+.7$;.:+$2.)+$)0$+7'9'/.)+$')
®<*+/$)*+2+$'($/+')*+2$02$(42-74($02$(*02).:+$)*+$
7.6042$9.2L+)$'($'/$+\4'7'62'49$%.$1477$+9-70C9+/)$
+\4'7'62'49
-Potential$GDP
]04`=+$(++/$)*.)$)*+$-20345)'0/$14/5)'0/$)+77($4($)*+$\4./)')C$01$2+.7$
?@A$)*.)$.$:'=+/$.904/)$01$7.6042$5./$-20345+
§I*+$\4./)')C$01$2+.7$?@A$-20345+3$'/52+.(+($.($)*+$\4./)')C$01$
7.6042$'/52+.(+(
§8)$)*+$+\4'7'62'49$\4./)')C$01$7.6042N$)*+$+50/09C$'($.)$1477$
+9-70C9+/)N$./3$)*+$\4./)')C$01$2+.7$?@A$.)$1477$+9-70C9+/)$'($
-0)+/)'.7$?@A
HO0$)*+$1477$+9-70C9+/)$\4./)')C$01$7.6042$-20345+($
-0)+/)'.7$?@A
-What$Makes$Potential$GDP$grow?
<+$5./$3'='3+$.77$)*+$1025+($)*.)$9.L+$-0)+/)'.7$?@A$:20;$'/)0$);0$
5.)+:02'+(
§Growth$of$the$supply$of$labour
H<*+/$)*+$(4--7C$01$7.6042$:20;(N$)*+$(4--7C$01$7.6042$
542=+$(*'1)($2':*);.23N$./3$)*+$\4./)')C$01$7.6042$.)$.$:'=+/$
2+.7$;.:+$2.)+$'/52+.(+(
HI*+$\4./)')C$01$7.6042$'($)*+$/496+2$01$;02L+2($+9-70C+3$
947)'-7'+3$6C$.=+2.:+$*042($-+2$;02L+2
®I*+$/496+2$+9-70C+3$+\4.7($)*+$+9-70C9+/)$
-0-47.)'0/$2.)'0$947)'-7'+3$6C$)*+$;02L'/:$.:+$
-0-47.)'0/N$3'='3+3$6C$"EE
HO0$)*+$\4./)')C$01$7.6042$5*./:+($.($.$2+(47)$01$5*./:+($'/a
®8=+2.:+$*042($-+2$;02L+2
®I*+$+9-70C9+/)%)0%-0-47.)'0/$2.)'0
®I*+$;02L'/:$.:+$-0-47.)'0/
H8=+2.:+$*042($-+2$;02L+2($*.=+$3+52+.(+3$.($)*+$
;02L;++L$6+509+($(*02)+2N$./3$)*+$+9-70C9+/)$)0$
-0-47.)'0/$2.)'0$*.($'/52+.(+3$.($902+$;09+/$*.=+$
+/)+2+3$)*+$7.6042$1025+
HI*+$5096'/+3$+11+5)$01$)*+(+$);0$1.5)02($*.($L+-)$.=+2.:+$
*042($-+2$;02L'/:$.:+$-+2(0/$K.-20,RM$50/()./)
H?20;)*$'/$)*+$(4--7C$01$7.6042$*.($509+$1209$:20;)*$'/$
)*+$;02L'/:$.:+$-0-47.)'0/
®T/$)*+$70/:$24/N$:20;)*$01$;02L'/:$-0-47.)'0/$:20;($
.)$)*+$(.9+$2.)+$.($)0).7$-0-47.)'0/
HEffects$of$population$Growth
®A0-47.)'0/$:20;)*$62'/:($:20;)*$'/$)*+$(4--7C$01$
7.6042N$64)$')$30+($/0)$5*./:+$)*+$3+9./3$102$7.6042$
02$)*+$-20345)'0/$14/5)'0/
®I*+$+50/09C$5./$-20345+$902+$04)-4)$6C$4('/:$
902+$7.6042N$64)$)*+2+$'($/0$5*./:+$'/$)*+$\4./)')C$
01$2+.7$?@A$)*.)$.$:'=+/$\4./)')C$01$7.6042$5./$
-20345+
®<')*$./$'/52+.(+$'/$)*+$(4--7C$01$7.6042$./3$/0$
5*./:+$'/$)*+$3+9./3$102$7.6042N$2+.7$ ;.:+$2.)+$1.77($
./3$+\4'7'62'49$\4./)')C$01$7.6042$'/52+.(+(
®I*+$'/52+.(+3$\4./)')C$01$7.6042$-20345+($902+$
04)-4)$./3$-0)+/)'.7$?@A$'/52+.(+(
§Growth$of$labour$productivity
HLabour$productivity$$'($)*+$\4./)')C$01$2+.7$?@A$-20345+3$
6C$./$*042$01$7.6042
HT)$'($5.7547.)+3$6C$3'='3'/:$2+.7$?@A$6C$.::2+:.)+$7.6042$
*042(
HFor$example:$'1$2+.7$?@A$'($F"#EE$6'77'0/$./3$.::2+:.)+$
*042($.2+$&E$6'77'0/N$7.6042$-20345)'=')C$'($FG!$./$*042
H<*+/$7.6042$-20345)'=')C$:20;(N$2+.7$?@A$-+2$-+2(0/$
:20;($./3$62'/:($.$2'('/:$()./3.23$01$7'='/:
HEffects$of$an$increase$in$labour$productivity:
®T1$7.6042$-20345)'=')C$'/52+.(+(N$-20345)'0/$
-0(('6'7')'+($+,-./3
®I*+$\4./)')C$01$2+.7$?@A$)*.)$./C$:'=+/$\4./)')C$01$
7.6042$5./$-20345+$'/52+.(+(
®T1$7.6042$'($902+$-20345)'=+N$1'29($.2+$;'77'/:$)0$-.C$
102$902+$.$:'=+/$/496+2$01$*042($01$7.6042$(0$)*+$
3+9./3$102$7.6042$'/52+.(+(
®<')*$./$increase%'/$)*+$3+9./3$102$7.6042$./3$no%
change%in%the%supply%of%labour%N$)*+$2+.7$;.:+$2.)+$
2'(+($./3$)*+$\4./)')C$01$7.6042$(4--7'+3$'/52+.(+(
®I*+$+\4'7'62'49$\4./)')C$01$7.6042$.7(0$'/52+.(+(
O0$./$'/52+.(+$'/$7.6042$-20345)'=')C$'/52+.(+($
-0)+/)'.7$?@A$102$);0$2+.(0/(a
}P.6042$'($902+$-20345)'=+
}d02+$7.6042$'($+9-70C+3
Chapter(22.1-3:(Economic(Growth
I*42(3.CN$W+624.2C$ &N$&E"Z
Ga!"$Ad

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

!"#$%!&!
The$Basics$of$Economic$Growth
Economic$Growth$'($)*+$+,-./('0/$01$-20345)'0/$-0(('6'7')'+(
-
8$2.-'3$-.5+$01$+50/09'5$:20;)*$5./$)2./(1029$.$-002$/.)'0/$'/)0$.$2'5*$0/
-
Calculating$Growth$Rates
<+$+,-2+(($.$growth$rate$.($)*+$.//4.7$-+25+/).:+$5*./:+$01$.$
=.2'.67+$%)*+$5*./:+$'/$)*+$7+=+7$+,-2+((+3$.($.$-+25+/).:+$01$)*+$
'/')'.7$7+=+7
The$Growth$Rate$for$Real$GDP:
>+.7$?@A$:20;)*$2.)+$B$>+.7$?@A$5422+/)$C+.2$%>+.7$?@A$
-2+='04($C+.2$D$>+.7$?@A$-2+='04($C+.2$,$"EE
§
For$example:
>+.7$?@A$:20;)*$2.)+$B$F"G!E$6'77'0/$%F"!EE$6'77'0/$D$
F"!EE$6'77'0/$B$"E$-+25+/)
H
§
I*+$:20;)*$2.)+$01$2+.7$?@A$)+77($4($$*0;$2.-'37C$)*+$total%+50/09C$'($
+,-./3'/:
I*'($9+.(42+$'($4(+3$102$)+77'/:$4($.604)$-0)+/)'.7$5*./:+($'/$)*+$
6.7./5+$01$+50/09'5$-0;+2$.90/:$/.)'0/(
J4)$')$30+($/0)$)+77$4($.604)$5*./:+($'/$)*+$()./3.23$01$7'='/:
§
The$Standard$of$living$K.L.$-+2$5.-').7$>+.7$?@AM$N$;*'5*$'($2+.7$?@A$
3'='3+3$6C$)*+$-0-47.)'0/
O0$)*+$50/)2'64)'0/$01$2+.7$?@A$:20;)*$)*+$5*./:+$'/$()./3.23$01$
7'='/:$3+-+/3($0/$:20;)*$2.)+$01$2+.7$?@A
§
I0$5.7547.)+$ :20;)*$2.)+$01$2+.7$?@A$-+2$5.-').$;+$2+-7.5+$ 2+.7$
?@A$;')*$2+.7$?@A$-+2$5.-').
§
Real$GDP$per$Person$growth$rate
O)./3.23$01$P'='/:$?20;)*$>.)+$B$>+.7$?@A$-+2$-+2(0/$5422+/)$
C+.2$%>+.7$?@A$-+2$-+2(0/$-2+='04($C+.2$D$>+.7$?@A$-+2$-+2(0/$
-2+='04($C+.2$,$"EE
§
For$Example:
>+.7$?@A$-+2$-+2(0/$:20;)*$2.)+$B$F!##!!$%F!EEEE$D$
F!EEEE$,$"EE$B$QRS$-+25+/)
H
§
I*+$:20;)*$2.)+$01$2+.7$?@A$-+2(0/$5./$.7(0$6+$5.7547.)+3$
K.-20,RM$6C$(46)2.5)'/:$)*+$-0-47.)'0/$:20;)*$2.)+$1209$)*+$2+.7$
?@A$:20;)*$2.)+
§
-
Economic$Growth$vs.$Business$Cycle$Expansion
>+.7$?@A$5./$'/52+.(+$102$);0$3'()'/5)$2+.(0/
I*+$+50/09C$9':*)$6+$2+)42/'/:$)0$1477$+9-70C9+/)$'/$./$
+,-./('0/$-*.(+$01$)*+$64('/+(($5C57+$02$potential%?@A$9':*)$6+$
'/52+.('/:
§
I*+$2+)42/$01$1477$+9-70C9+/)$'/$)*+$+,-./('0/$-*.(+$01$)*+$64('/+(($
5C57+$'($/0)$+50/09'5$:20;)*
§
I*+$+,-./('0/$01$-0)+/)'.7$?@A$'($+50/09'5$:20;)*
§
V50/09'5$:20;)*$'($)*+$+,-./('0/$01$-20345)'0/$-0(('6'7')'+(
T)$'($./$04);.23$90=+9+/)$01$)*+$AAW
§
I*+$:20;)*$2.)+$01$-0)+/)'.7$?@A$9+.(42+($)*+$-.5+$01$+,-./('0/$01$
-20345)'0/$-0(('6'7')'+($./3$(900)*+($04)$)*+$64('/+(($5C57+$
1745)4.)'0/($'/$)*+$:20;)*$2.)+$01$2+.7$?@A
-
The$Magic$of$Sustained$Growth
O4().'/+3$:20;)*$01$2+.7$?@A$-+2$-+2(0/$5./$)2./(1029$.$-002$(05'+)C$
'/)0$.$;+.7)*C$(05'+)C
§
Compound$Interest
O4--0(+$)*.)$C04$-4)$F"EE$'/$)*+$6./L$./3$+.2/$.604)$!$-+25+/)$
.$C+.2$01$'/)+2+()$0/$')
§
V.2/'/:$'/)+2+()$0/$'/)+2+()
H
§
I*+$./(;+2$'($-20='3+3$'/$the$rule$of$70 ;*'5*$().)+($)*.)$
)*+$/496+2$01$C+.2($')$).L+($102$)*+$7+=+7$01$./C$=.2'.67+$)0$
30467+$'($.-20,R$ZE$3'='3+3$6C$)*+$.//4.7$-+25+/).:+$
:20;)*$2.)+$01$)*+$=.2'.67+
For$example:$ZE$3'='3+3$![$+\4.7($"#$N$)*+2+102+$')$
;0473$).L+$"#$C+.2($102$F"EE$)0$)42/$'/)0$F&EE
®
H
§
-
Applying$the$rule$of$70
I*+$247+$01$ZE$.--7'+($)0$./C$=.2'.67+N$(0$')$5./$.--7C$)0$2+.7$?@A$-+2$
-+2(0/
Figure$22.3$(*0;($)*+$30467'/:$)'9+$102$:20;)*$2.)+($01$"$-+25+/)$-+2$
C+.2$)0$"&$-+25+/)$-+2$C+.2
]04$5./$(++$)*.)$>+.7$?@A$-+2$-+2(0/$30467+($'/$ZE$C+.2($KZED"M$%
./$.=+2.:+$*49./$7'1+$(-./$%'1$)*+$:20;)*$2.)+$'($"$-+25+/)$-+2$
C+.2N$')$30467+($)0$^!$-+25+/)$$'1$)*+$:20;)*$2.)+$'($&$-+25+/)$-+2$
C+.2N$./3$'/$"E$C+.2($'1$)*+$:20;)*$2.)+$'($Z$-+25+/)$-+2$C+.2
§
<+$5./$4(+$)*+$>47+$01$ZE$)0$./(;+2$)*'($\4+()'0/$.604)$+50/09'5$
:20;)*
For$example:$'/$&E"#$_./.3'./$2+.7$?@A$-+2$-+2(0/$;.($.-20,R$#$)'9+($
)*.)$01$_*'/.
_*'/.`($2+5+/)$:20;)*$2.)+$01$2+.7$?@A$-+2$-+2(0/$;.($"E$-+25+/)$
-+2$C+.2
§
T1$)*+$:20;)*$2.)+$;.($2+9.'/$4/5*./:+3N$*0;$70/:$;0473$')$).L+$
_*'/.`($2+.7$?@A$-+2$-+2(0/$)0$2+.5*$)*.)$01$_./.3.$'/$&E"#Y
§
I*+$./(;+2$'($-20='3+3$6C$)*+$247+$01$ZEN$'($"#$C+.2(
§
_*'/.`($2+.7$?@A$-+2$-+2(0/$30467+($'/$Z$C+.2($KZE$D$"EMN
§
T)$30467+($.:.'/$)0$#$)'9+($')($5422+/)$7+=+7$'/$./0)*+2$Z$C+.2(N$(0$
.1)+2$"#$C+.2($01$:20;)*$.)$"E$-+25+/)$.$C+.2N$_*'/.`($2+.7$ ?@A$
-+2(0/$'($#$)'9+($')($5422+/)$7+=+7$./3$+\4.7($)*.)$01$_./.3.$'/$
&E"#
§
-
Long$Term$Growth$Trends
-]04$*.=+$U4()$(++/$)*+$-0;+2$01$+50/09'5$:20;)*$)0$'/52+.(+$'/509+(
-8)$.$"$-+25+/)$:20;)*$2.)+$')$).L+($.$*49./$7'1+$(-./$)0$30467+$)*+$()./3.23$
01$7'='/:
-J4)$.)$.$Z$-+25+/)$:20;)*$2.)+N$)*+$()./3.23$01$7'='/:$30467+($+=+2C$3+5.3+
How$Potential$GDP$grows
-V50/09'5$:20;)*$05542($;*+/$2+.7$?@A$'/52+.(+(
-J4)$.$0/+$(*0)$2'(+$'/$2+.7$?@A$02$.$2+50=+2C$1209$2+5+(('0/$'($/0)$+50/09'5$
:20;)*
-V50/09'5$:20;)*$'($(4().'/+3N$C+.2%.1)+2$C+.2$'/52+.(+$'/$potential?@A
-What$Determined$Potential$GDP?
P.6042N$7./3$N$5.-').7$./3$+/)2+-2+/+42(*'-$-20345+$2+.7$?@AN$./3$)*+$
-20345)'=')C$01$)*+$1.5)02($01$-20345)'0/$3+)+29'/+($)*+$\4./)')C$01$
2+.7$?@A$)*.)$5./$6+$-20345+3
I*+$\4./)')C$01$7./3$'($1',+3N$./3$0/$./C$:'=+/$3.C$)*+$\4./)')'+($01$
+/)2+-2+/+42'.7$.6'7')C$./3$5.-').7$.2+$.7(0$1',+3$./3$)*+'2$-20345)'=')'+($
.2+$:'=+/
I*+$\4./)')C$01$7.6042$+9-70C+3$'($)*+$0/7C$variable%1.5)02$01$
-20345)'0/
A0)+/)'.7$?@A$'($)*+$7+=+7$01$2+.7$?@A$;*+/$)*+$\4./)')C$01$7.6042$
+9-70C+3$'($)*+$1477$+9-70C9+/)$\4./)')C
I0$3+)+29'/+$-0)+/)'.7$?@A$;+$4(+$.$903+7$;')*$);0$509-0/+/)(a
§An$Aggregate$production$function
H<*+/$C04$()43'+3$)*+$7'9')($)0$-20345)'0/$'/$5*.-)+2$&$
KAAWM$C04$7+.2/+3$)*.)$.$-20345)'0/$-0(('6'7')C$120/)'+2$'($
)*+$604/3.2C$6+);++/$)*+$5096'/.)'0/($01$:003($./3$
(+2='5+($)*.)$5./D5.//0)$6+$-20345+3
H<+$/0;$700L$.)$)*+$AAW$102$)0;$(-+5'.7$ b:003(b$a$2+.7$?@A$
./3$)*+$\4./)')C$01$7+'(42+$)'9+
®I*'/L$01$2+.7$?@A$.($.$/496+2$01$6':$(*0--'/:$01$6':$
(*0--'/:$5.2)(N$+.5*$5.2)$50/).'/($(09+$01$+.5*$
3'11+2+/)$:003($./3$(+2='5+($-20345+3
®I*'/L$01$7+'(42+$ )'9+$.($)*+$/496+2$01$*042($/0)$
(-+/)$;02L'/:N$+.5*$7+'(42+$*042$50473$6+$(-+/)$
;02L'/:
T1$;+$(-+/)$.77$042$)'9+$).L'/:$7+'(42+N$;+$
;0473$30$/0$;02L$./3$2+.7$?@A$;0473$6+$c+20
I*+$902+$7+'(42+$;+$102:0N$)*+$:2+.)+2$01$)*+$
\4./)')C$01$7.6042$;+$(4--7C$./3$)*+$:2+.)+2$
\4./)')C$01$2+.7$?@A$'($-20345+3
<+$4(+$042$90()$-20345)'=+$*042($1'2()N$./3$.($
902+$*042($.2+$;02L+3N$)*+(+$*042($6+509'/:$
'/52+.('/:7C$7+(($-20345)'=+
HI*+$aggregate$production$function$'($)*+$2+7.)'0/(*'-$)*.)$
)+77($4($*0;$2+.7$?@A$5*./:+($.($)*+$\4./)')C$01$7.6042$
5*./:+($;*+/$.77$0)*+2$'/174+/5+($0/$-20345)'0/$2+9.'/($
)*+$(.9+
®8/$'/52+.(+$'/$)*+$\4./)')C$01$7.6042$K9+./($$
3+52+.(+$'/$7+'(42+$)'9+M$62'/:($.$90=+9+/)$.70/:$
)*+$-20345)'0/$14/5)'0/$./3$./$'/52+.(+$'/$2+.7$?@A
§An$Aggregate$labour$market
HT/$9.520+50/09'5($;+$-2+)+/3$)*.)$)*+2+$'($0/+$7.2:+$
7.6042$9.2L+)$)*.)$3+)+29'/+($)*+$\4./)')C$01$7.6042$
+9-70C+3$./3$)*+$\4./)')C$01$2+.7$ ?@A$-20345+3
®I0$(++$*0;$)*'($.::2+:.)+$7.6042$9.2L+)$;02L($;+$
()43C$)*+$3+9./3$102$7.6042N$)*+$(4--7C$102$7.6042$
./3$)*+$7.6042$9.2L+)$+\4'7'62'49
HDemand$for$Labour
®T($)*+$2+7.)'0/(*'-$6+);++/$)*+$\4./)')C$01$7.6042$
3+9./3+3$./3$)*+$2+.7$;.:+$2.)+
®I*+$\4./)')C$01$7.6042$3+9./3+3$'($)*+$/496+2$01$
*042($*'2+3$6C$.77$)*+$1'29($'/$)*+$+50/09C$T$.$:'=+/$
-+2'03R
I*'($\4./)')C$3+-+/3($0/$)*+$-2'5+$01$7.6042
®I*+$real$wage$rate$'($)*+$90/+C$;.:+$2.)+$3'='3+3$
6C$)*+$-2'5+$7+=+7
I*+$2+.7$ ;.:+$2.)+$'($)*+$\4./)')C$01$:003($./3$
(+2='5+($)*.)$./$*042$01$7.6042$+.2/(
T)$50/)2.()($;')*$)*+$90/+C$;.:+$2.)+N$;*'5*$'($
)*+$$/496+2$01$3077.2($)*.)$./$*042$01$7.6042$
+.2/(
I*+$real%wage%rate%'/174+/5+($)*+$\4./)')C$01$
7.6042$3+9./3+3$6+5.4(+$;*.)$9.))+2($)0$
1'29($'($/0)$)*+$/496+2$01$3077.2($)*+C$-.C$
K90/+C$;.:+$2.)+M$64)$*0;$945*$04)-4)$)*+C$
94()$(+77$)0$+.2/$)*0(+$3077.2(R
®I*+$\4./)')C$01$7.6042$3+9./3+3$increases%.($)*+$
2+.7$;.:+$2.)+$decreases%%)*+$3+9./3$102$7.6042$
542=+$(70-+($30;/;.23$N$;*CY
I*+$./(;+2$7'+($'/$)*+$(*.-+$01$)*+$-20345)'0/$
14/5)'0/
}]04`=+$(++/$)*.)$.70/:$)*+$-20345)'0/$
14/5)'0/$+.5*$.33')'0/.7$$*042$01$7.6042$
'/52+.(+($)*+$2+.7$?@A$6C$(455+(('=+7C$
(9.77+2$.904/)(N$)*'($)+/3+/5C$*.($.$
/.9+a$the$law$of$diminishing$returns$
J+5.4(+$01$3'9'/'(*'/:$2+)42/(N$
1'29($;'77$*'2+$902+$7.6042$0/7C$'1$
2.)+($1.77($)0$9.)5*$)*+$1.77$'/$+,)2.$
04)-4)$-20345+3$6C$)*.)$7.6042
HSupply$of$Labour
®T($)*+$2+7.)'0/(*'-$6+);++/$)*+$\4./)')C$01$7.6042$
(4--7'+3$./3$)*+$2+.7$;.:+$2.)+
®I*+$\4./)')C$01$7.6042$(4--7'+3$'($)*+$/496+2$01$
7.6042$*042($)*.)$.77$*04(+*073($'/$)*+$+50/09C$-7./$
)0$;02L$342'/:$.$:'=+/$-+2'03
I*+$\4./)')C$3+-+/3($0/$)*+$2+.7$;.:+$2.)+
®I*+$real%wage%rate%'/174+/5+($)*+$\4./)')C$01$7.6042$
(4--7'+3$6+5.4(+$;*.)$9.))+2($)0$*04(+$*073($'($/0)$
)*+$/496+2$01$3077.2($)*+C$+.2/$K90/+C$;.:+$2.)+M$
64)$;*.)$)*+C$5./$64C$;')*$)*0(+$3077.2(
®I*+$\4./)')C$01$7.6042$(4--7'+($increases%.($)*+$2+.7$
;.:+$2.)+$increases%-)*+$(4--7C$01$7.6042$542=+$
(70-+($4-;.23
®8)$.$*':*+2$;.:+$2.)+N$902+$-+0-7+$5*00(+$)0$;02L$
./3$902+$-+0-7+$5*00(+$)0$;02L$70/:+2$*042($'1$)*+C$
5./$+.2/$902+$-+2$*042R
HLabour$Market$Equilibrium
®I*+$-2'5+$01$7.6042$'($)*+$2+.7$ ;.:+$2.)+
®I*+$1025+($01$(4--7C$./3$3+9./3$0-+2.)+$'/$7.6042$
9.2L+)($U4()$.($)*+C$30$'/$9.2L+)($102$:003($./3$
(+2='5+($)0$+7'9'/.)+$(*02).:+D(42-74(
®J4)$.$(*02).:+$02$(42-74($'/$7.6042$0/7C$62'/:($.$
:2.34.7$5*./:+$'/$2+.7$;.:+$2.)+
T1$)*+2+$'($.$(*02).:+$'/$7.6042N$)*+$2+.7$;.:+$
2.)+$2'(+($)0$+7'9'/.)+$')
T1$)*+2+$'($.$(42-74($'/$7.6042$)*+2+$'($1.77$'/$)*+$
2+.7$;.:+$2.)+$)0$+7'9'/.)+$')
®<*+/$)*+2+$'($/+')*+2$02$(42-74($02$(*02).:+$)*+$
7.6042$9.2L+)$'($'/$+\4'7'62'49$%.$1477$+9-70C9+/)$
+\4'7'62'49
-Potential$GDP
]04`=+$(++/$)*.)$)*+$-20345)'0/$14/5)'0/$)+77($4($)*+$\4./)')C$01$2+.7$
?@A$)*.)$.$:'=+/$.904/)$01$7.6042$5./$-20345+
§I*+$\4./)')C$01$2+.7$?@A$-20345+3$'/52+.(+($.($)*+$\4./)')C$01$
7.6042$'/52+.(+(
§8)$)*+$+\4'7'62'49$\4./)')C$01$7.6042N$)*+$+50/09C$'($.)$1477$
+9-70C9+/)N$./3$)*+$\4./)')C$01$2+.7$?@A$.)$1477$+9-70C9+/)$'($
-0)+/)'.7$?@A
HO0$)*+$1477$+9-70C9+/)$\4./)')C$01$7.6042$-20345+($
-0)+/)'.7$?@A
-What$Makes$Potential$GDP$grow?
<+$5./$3'='3+$.77$)*+$1025+($)*.)$9.L+$-0)+/)'.7$?@A$:20;$'/)0$);0$
5.)+:02'+(
§Growth$of$the$supply$of$labour
H<*+/$)*+$(4--7C$01$7.6042$:20;(N$)*+$(4--7C$01$7.6042$
542=+$(*'1)($2':*);.23N$./3$)*+$\4./)')C$01$7.6042$.)$.$:'=+/$
2+.7$;.:+$2.)+$'/52+.(+(
HI*+$\4./)')C$01$7.6042$'($)*+$/496+2$01$;02L+2($+9-70C+3$
947)'-7'+3$6C$.=+2.:+$*042($-+2$;02L+2
®I*+$/496+2$+9-70C+3$+\4.7($)*+$+9-70C9+/)$
-0-47.)'0/$2.)'0$947)'-7'+3$6C$)*+$;02L'/:$.:+$
-0-47.)'0/N$3'='3+3$6C$"EE
HO0$)*+$\4./)')C$01$7.6042$5*./:+($.($.$2+(47)$01$5*./:+($'/a
®8=+2.:+$*042($-+2$;02L+2
®I*+$+9-70C9+/)%)0%-0-47.)'0/$2.)'0
®I*+$;02L'/:$.:+$-0-47.)'0/
H8=+2.:+$*042($-+2$;02L+2($*.=+$3+52+.(+3$.($)*+$
;02L;++L$6+509+($(*02)+2N$./3$)*+$+9-70C9+/)$)0$
-0-47.)'0/$2.)'0$*.($'/52+.(+3$.($902+$;09+/$*.=+$
+/)+2+3$)*+$7.6042$1025+
HI*+$5096'/+3$+11+5)$01$)*+(+$);0$1.5)02($*.($L+-)$.=+2.:+$
*042($-+2$;02L'/:$.:+$-+2(0/$K.-20,RM$50/()./)
H?20;)*$'/$)*+$(4--7C$01$7.6042$*.($509+$1209$:20;)*$'/$
)*+$;02L'/:$.:+$-0-47.)'0/
®T/$)*+$70/:$24/N$:20;)*$01$;02L'/:$-0-47.)'0/$:20;($
.)$)*+$(.9+$2.)+$.($)0).7$-0-47.)'0/
HEffects$of$population$Growth
®A0-47.)'0/$:20;)*$62'/:($:20;)*$'/$)*+$(4--7C$01$
7.6042N$64)$')$30+($/0)$5*./:+$)*+$3+9./3$102$7.6042$
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-20345+
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®I*+$'/52+.(+3$\4./)')C$01$7.6042$-20345+($902+$
04)-4)$./3$-0)+/)'.7$?@A$'/52+.(+(
§Growth$of$labour$productivity
HLabour$productivity$$'($)*+$\4./)')C$01$2+.7$?@A$-20345+3$
6C$./$*042$01$7.6042
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HFor$example:$'1$2+.7$?@A$'($F"#EE$6'77'0/$./3$.::2+:.)+$
*042($.2+$&E$6'77'0/N$7.6042$-20345)'=')C$'($FG!$./$*042
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:20;($./3$62'/:($.$2'('/:$()./3.23$01$7'='/:
HEffects$of$an$increase$in$labour$productivity:
®T1$7.6042$-20345)'=')C$'/52+.(+(N$-20345)'0/$
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7.6042$5./$-20345+$'/52+.(+(
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102$902+$.$:'=+/$/496+2$01$*042($01$7.6042$(0$)*+$
3+9./3$102$7.6042$'/52+.(+(
®<')*$./$increase%'/$)*+$3+9./3$102$7.6042$./3$no%
change%in%the%supply%of%labour%N$)*+$2+.7$;.:+$2.)+$
2'(+($./3$)*+$\4./)')C$01$7.6042$(4--7'+3$'/52+.(+(
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-0)+/)'.7$?@A$102$);0$2+.(0/(a
}P.6042$'($902+$-20345)'=+
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Chapter(22.1-3:(Economic(Growth
I*42(3.CN$W+624.2C$ &N$&E"Z Ga!"$Ad

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

!"#$%!&!
The$Basics$of$Economic$Growth
Economic$Growth$'($)*+$+,-./('0/$01$-20345)'0/$-0(('6'7')'+(
-
8$2.-'3$-.5+$01$+50/09'5$:20;)*$5./$)2./(1029$.$-002$/.)'0/$'/)0$.$2'5*$0/
-
Calculating$Growth$Rates
<+$+,-2+(($.$growth$rate$.($)*+$.//4.7$-+25+/).:+$5*./:+$01$.$
=.2'.67+$%)*+$5*./:+$'/$)*+$7+=+7$+,-2+((+3$.($.$-+25+/).:+$01$)*+$
'/')'.7$7+=+7
The$Growth$Rate$for$Real$GDP:
>+.7$?@A$:20;)*$2.)+$B$>+.7$?@A$5422+/)$C+.2$%>+.7$?@A$
-2+='04($C+.2$D$>+.7$?@A$-2+='04($C+.2$,$"EE
§
For$example:
>+.7$?@A$:20;)*$2.)+$B$F"G!E$6'77'0/$%F"!EE$6'77'0/$D$
F"!EE$6'77'0/$B$"E$-+25+/)
H
§
I*+$:20;)*$2.)+$01$2+.7$?@A$)+77($4($$*0;$2.-'37C$)*+$total%+50/09C$'($
+,-./3'/:
I*'($9+.(42+$'($4(+3$102$)+77'/:$4($.604)$-0)+/)'.7$5*./:+($'/$)*+$
6.7./5+$01$+50/09'5$-0;+2$.90/:$/.)'0/(
J4)$')$30+($/0)$)+77$4($.604)$5*./:+($'/$)*+$()./3.23$01$7'='/:
§
The$Standard$of$living$K.L.$-+2$5.-').7$>+.7$?@AM$N$;*'5*$'($2+.7$?@A$
3'='3+3$6C$)*+$-0-47.)'0/
O0$)*+$50/)2'64)'0/$01$2+.7$?@A$:20;)*$)*+$5*./:+$'/$()./3.23$01$
7'='/:$3+-+/3($0/$:20;)*$2.)+$01$2+.7$?@A
§
I0$5.7547.)+$ :20;)*$2.)+$01$2+.7$?@A$-+2$5.-').$;+$2+-7.5+$ 2+.7$
?@A$;')*$2+.7$?@A$-+2$5.-').
§
Real$GDP$per$Person$growth$rate
O)./3.23$01$P'='/:$?20;)*$>.)+$B$>+.7$?@A$-+2$-+2(0/$5422+/)$
C+.2$%>+.7$?@A$-+2$-+2(0/$-2+='04($C+.2$D$>+.7$?@A$-+2$-+2(0/$
-2+='04($C+.2$,$"EE
§
For$Example:
>+.7$?@A$-+2$-+2(0/$:20;)*$2.)+$B$F!##!!$%F!EEEE$D$
F!EEEE$,$"EE$B$QRS$-+25+/)
H
§
I*+$:20;)*$2.)+$01$2+.7$?@A$-+2(0/$5./$.7(0$6+$5.7547.)+3$
K.-20,RM$6C$(46)2.5)'/:$)*+$-0-47.)'0/$:20;)*$2.)+$1209$)*+$2+.7$
?@A$:20;)*$2.)+
§
-
Economic$Growth$vs.$Business$Cycle$Expansion
>+.7$?@A$5./$'/52+.(+$102$);0$3'()'/5)$2+.(0/
I*+$+50/09C$9':*)$6+$2+)42/'/:$)0$1477$+9-70C9+/)$'/$./$
+,-./('0/$-*.(+$01$)*+$64('/+(($5C57+$02$potential%?@A$9':*)$6+$
'/52+.('/:
§
I*+$2+)42/$01$1477$+9-70C9+/)$'/$)*+$+,-./('0/$-*.(+$01$)*+$64('/+(($
5C57+$'($/0)$+50/09'5$:20;)*
T)$'($U4()$).L'/:$4-$)*+$(7.5L$)*.)$2+(47)+3$1209$.$-2+='04($
2+5+(('0/
§
I*+$+,-./('0/$01$-0)+/)'.7$?@A$'($+50/09'5$:20;)*
§
V50/09'5$:20;)*$'($)*+$+,-./('0/$01$-20345)'0/$-0(('6'7')'+(
T)$'($./$04);.23$90=+9+/)$01$)*+$AAW
§
I*+$:20;)*$2.)+$01$-0)+/)'.7$?@A$9+.(42+($)*+$-.5+$01$+,-./('0/$01$
-20345)'0/$-0(('6'7')'+($./3$(900)*+($04)$)*+$64('/+(($5C57+$
1745)4.)'0/($'/$)*+$:20;)*$2.)+$01$2+.7$?@A
-
The$Magic$of$Sustained$Growth
O4().'/+3$:20;)*$01$2+.7$?@A$-+2$-+2(0/$5./$)2./(1029$.$-002$(05'+)C$
'/)0$.$;+.7)*C$(05'+)C
)*+$2+.(0/$6+'/:$'($6+5.4(+$+50/09'5$:20;)*$'($7'L+$509-04/3$
'/)+2+()
§
Compound$Interest
O4--0(+$)*.)$C04$-4)$F"EE$'/$)*+$6./L$./3$+.2/$.604)$!$-+25+/)$
.$C+.2$01$'/)+2+()$0/$')
§
81)+2$0/+$C+.2$C04$*.=+$F"E!$./3$'1$C04$7+.=+$)*.)$F"E!$'/$)*+$
6./L$102$./0)*+2$C+.2N$C04$+.2/$!$-+25+/)$0/$)*+$02':'/.7$F"EE$
./3$)*+$F!$C04$:.'/+3
V.2/'/:$'/)+2+()$0/$'/)+2+()H
§
X0;$70/:$;'77$')$).L+$102$)*+$'/')'.7$ 3+-0(')$)0$30467+$)0$F&EEY
I*+$./(;+2$'($-20='3+3$'/$the$rule$of$70 ;*'5*$().)+($)*.)$
)*+$/496+2$01$C+.2($')$).L+($102$)*+$7+=+7$01$./C$=.2'.67+$)0$
30467+$'($.-20,R$ZE$3'='3+3$6C$)*+$.//4.7$-+25+/).:+$
:20;)*$2.)+$01$)*+$=.2'.67+
For$example:$ZE$3'='3+3$![$+\4.7($"#$N$)*+2+102+$')$
;0473$).L+$"#$C+.2($102$F"EE$)0$)42/$'/)0$F&EE
®
H
§
-
Applying$the$rule$of$70
I*+$247+$01$ZE$.--7'+($)0$./C$=.2'.67+N$(0$')$5./$.--7C$)0$2+.7$?@A$-+2$
-+2(0/
Figure$22.3$(*0;($)*+$30467'/:$)'9+$102$:20;)*$2.)+($01$"$-+25+/)$-+2$
C+.2$)0$"&$-+25+/)$-+2$C+.2
]04$5./$(++$)*.)$>+.7$?@A$-+2$-+2(0/$30467+($'/$ZE$C+.2($KZED"M$%
./$.=+2.:+$*49./$7'1+$(-./$%'1$)*+$:20;)*$2.)+$'($"$-+25+/)$-+2$
C+.2N$')$30467+($)0$^!$-+25+/)$$'1$)*+$:20;)*$2.)+$'($&$-+25+/)$-+2$
C+.2N$./3$'/$"E$C+.2($'1$)*+$:20;)*$2.)+$'($Z$-+25+/)$-+2$C+.2
§
<+$5./$4(+$)*+$>47+$01$ZE$)0$./(;+2$)*'($\4+()'0/$.604)$+50/09'5$
:20;)*
For$example:$'/$&E"#$_./.3'./$2+.7$?@A$-+2$-+2(0/$;.($.-20,R$#$)'9+($
)*.)$01$_*'/.
_*'/.`($2+5+/)$:20;)*$2.)+$01$2+.7$?@A$-+2$-+2(0/$;.($"E$-+25+/)$
-+2$C+.2
§
T1$)*+$:20;)*$2.)+$;.($2+9.'/$4/5*./:+3N$*0;$70/:$;0473$')$).L+$
_*'/.`($2+.7$?@A$-+2$-+2(0/$)0$2+.5*$)*.)$01$_./.3.$'/$&E"#Y
§
I*+$./(;+2$'($-20='3+3$6C$)*+$247+$01$ZEN$'($"#$C+.2(
§
_*'/.`($2+.7$?@A$-+2$-+2(0/$30467+($'/$Z$C+.2($KZE$D$"EMN
§
T)$30467+($.:.'/$)0$#$)'9+($')($5422+/)$7+=+7$'/$./0)*+2$Z$C+.2(N$(0$
.1)+2$"#$C+.2($01$:20;)*$.)$"E$-+25+/)$.$C+.2N$_*'/.`($2+.7$ ?@A$
-+2(0/$'($#$)'9+($')($5422+/)$7+=+7$./3$+\4.7($)*.)$01$_./.3.$'/$
&E"#
§
-
Long$Term$Growth$Trends
-
]04$*.=+$U4()$(++/$)*+$-0;+2$01$+50/09'5$:20;)*$)0$'/52+.(+$'/509+(
-
8)$.$"$-+25+/)$:20;)*$2.)+$')$).L+($.$*49./$7'1+$(-./$)0$30467+$)*+$()./3.23$
01$7'='/:
-
J4)$.)$.$Z$-+25+/)$:20;)*$2.)+N$)*+$()./3.23$01$7'='/:$30467+($+=+2C$3+5.3+
How$Potential$GDP$grows
-
V50/09'5$:20;)*$05542($;*+/$2+.7$?@A$'/52+.(+(
-
J4)$.$0/+$(*0)$2'(+$'/$2+.7$?@A$02$.$2+50=+2C$1209$2+5+(('0/$'($/0)$+50/09'5$
:20;)*
-V50/09'5$:20;)*$'($(4().'/+3N$C+.2%.1)+2$C+.2$'/52+.(+$'/$potential?@A
-What$Determined$Potential$GDP?
P.6042N$7./3$N$5.-').7$./3$+/)2+-2+/+42(*'-$-20345+$2+.7$?@AN$./3$)*+$
-20345)'=')C$01$)*+$1.5)02($01$-20345)'0/$3+)+29'/+($)*+$\4./)')C$01$
2+.7$?@A$)*.)$5./$6+$-20345+3
I*+$\4./)')C$01$7./3$'($1',+3N$./3$0/$./C$:'=+/$3.C$)*+$\4./)')'+($01$
+/)2+-2+/+42'.7$.6'7')C$./3$5.-').7$.2+$.7(0$1',+3$./3$)*+'2$-20345)'=')'+($
.2+$:'=+/
I*+$\4./)')C$01$7.6042$+9-70C+3$'($)*+$0/7C$variable%1.5)02$01$
-20345)'0/
A0)+/)'.7$?@A$'($)*+$7+=+7$01$2+.7$?@A$;*+/$)*+$\4./)')C$01$7.6042$
+9-70C+3$'($)*+$1477$+9-70C9+/)$\4./)')C
I0$3+)+29'/+$-0)+/)'.7$?@A$;+$4(+$.$903+7$;')*$);0$509-0/+/)(a
§An$Aggregate$production$function
H<*+/$C04$()43'+3$)*+$7'9')($)0$-20345)'0/$'/$5*.-)+2$&$
KAAWM$C04$7+.2/+3$)*.)$.$-20345)'0/$-0(('6'7')C$120/)'+2$'($
)*+$604/3.2C$6+);++/$)*+$5096'/.)'0/($01$:003($./3$
(+2='5+($)*.)$5./D5.//0)$6+$-20345+3
H<+$/0;$700L$.)$)*+$AAW$102$)0;$(-+5'.7$ b:003(b$a$2+.7$?@A$
./3$)*+$\4./)')C$01$7+'(42+$)'9+
®I*'/L$01$2+.7$?@A$.($.$/496+2$01$6':$(*0--'/:$01$6':$
(*0--'/:$5.2)(N$+.5*$5.2)$50/).'/($(09+$01$+.5*$
3'11+2+/)$:003($./3$(+2='5+($-20345+3
®I*'/L$01$7+'(42+$ )'9+$.($)*+$/496+2$01$*042($/0)$
(-+/)$;02L'/:N$+.5*$7+'(42+$*042$50473$6+$(-+/)$
;02L'/:
T1$;+$(-+/)$.77$042$)'9+$).L'/:$7+'(42+N$;+$
;0473$30$/0$;02L$./3$2+.7$?@A$;0473$6+$c+20
I*+$902+$7+'(42+$;+$102:0N$)*+$:2+.)+2$01$)*+$
\4./)')C$01$7.6042$;+$(4--7C$./3$)*+$:2+.)+2$
\4./)')C$01$2+.7$?@A$'($-20345+3
<+$4(+$042$90()$-20345)'=+$*042($1'2()N$./3$.($
902+$*042($.2+$;02L+3N$)*+(+$*042($6+509'/:$
'/52+.('/:7C$7+(($-20345)'=+
HI*+$aggregate$production$function$'($)*+$2+7.)'0/(*'-$)*.)$
)+77($4($*0;$2+.7$?@A$5*./:+($.($)*+$\4./)')C$01$7.6042$
5*./:+($;*+/$.77$0)*+2$'/174+/5+($0/$-20345)'0/$2+9.'/($
)*+$(.9+
®8/$'/52+.(+$'/$)*+$\4./)')C$01$7.6042$K9+./($$
3+52+.(+$'/$7+'(42+$)'9+M$62'/:($.$90=+9+/)$.70/:$
)*+$-20345)'0/$14/5)'0/$./3$./$'/52+.(+$'/$2+.7$?@A
§An$Aggregate$labour$market
HT/$9.520+50/09'5($;+$-2+)+/3$)*.)$)*+2+$'($0/+$7.2:+$
7.6042$9.2L+)$)*.)$3+)+29'/+($)*+$\4./)')C$01$7.6042$
+9-70C+3$./3$)*+$\4./)')C$01$2+.7$ ?@A$-20345+3
®I0$(++$*0;$)*'($.::2+:.)+$7.6042$9.2L+)$;02L($;+$
()43C$)*+$3+9./3$102$7.6042N$)*+$(4--7C$102$7.6042$
./3$)*+$7.6042$9.2L+)$+\4'7'62'49
HDemand$for$Labour
®T($)*+$2+7.)'0/(*'-$6+);++/$)*+$\4./)')C$01$7.6042$
3+9./3+3$./3$)*+$2+.7$;.:+$2.)+
®I*+$\4./)')C$01$7.6042$3+9./3+3$'($)*+$/496+2$01$
*042($*'2+3$6C$.77$)*+$1'29($'/$)*+$+50/09C$T$.$:'=+/$
-+2'03R
I*'($\4./)')C$3+-+/3($0/$)*+$-2'5+$01$7.6042
®I*+$real$wage$rate$'($)*+$90/+C$;.:+$2.)+$3'='3+3$
6C$)*+$-2'5+$7+=+7
I*+$2+.7$ ;.:+$2.)+$'($)*+$\4./)')C$01$:003($./3$
(+2='5+($)*.)$./$*042$01$7.6042$+.2/(
T)$50/)2.()($;')*$)*+$90/+C$;.:+$2.)+N$;*'5*$'($
)*+$$/496+2$01$3077.2($)*.)$./$*042$01$7.6042$
+.2/(
I*+$real%wage%rate%'/174+/5+($)*+$\4./)')C$01$
7.6042$3+9./3+3$6+5.4(+$;*.)$9.))+2($)0$
1'29($'($/0)$)*+$/496+2$01$3077.2($)*+C$-.C$
K90/+C$;.:+$2.)+M$64)$*0;$945*$04)-4)$)*+C$
94()$(+77$)0$+.2/$)*0(+$3077.2(R
®I*+$\4./)')C$01$7.6042$3+9./3+3$increases%.($)*+$
2+.7$;.:+$2.)+$decreases%%)*+$3+9./3$102$7.6042$
542=+$(70-+($30;/;.23$N$;*CY
I*+$./(;+2$7'+($'/$)*+$(*.-+$01$)*+$-20345)'0/$
14/5)'0/
}]04`=+$(++/$)*.)$.70/:$)*+$-20345)'0/$
14/5)'0/$+.5*$.33')'0/.7$$*042$01$7.6042$
'/52+.(+($)*+$2+.7$?@A$6C$(455+(('=+7C$
(9.77+2$.904/)(N$)*'($)+/3+/5C$*.($.$
/.9+a$the$law$of$diminishing$returns$
J+5.4(+$01$3'9'/'(*'/:$2+)42/(N$
1'29($;'77$*'2+$902+$7.6042$0/7C$'1$
2.)+($1.77($)0$9.)5*$)*+$1.77$'/$+,)2.$
04)-4)$-20345+3$6C$)*.)$7.6042
HSupply$of$Labour
®T($)*+$2+7.)'0/(*'-$6+);++/$)*+$\4./)')C$01$7.6042$
(4--7'+3$./3$)*+$2+.7$;.:+$2.)+
®I*+$\4./)')C$01$7.6042$(4--7'+3$'($)*+$/496+2$01$
7.6042$*042($)*.)$.77$*04(+*073($'/$)*+$+50/09C$-7./$
)0$;02L$342'/:$.$:'=+/$-+2'03
I*+$\4./)')C$3+-+/3($0/$)*+$2+.7$;.:+$2.)+
®I*+$real%wage%rate%'/174+/5+($)*+$\4./)')C$01$7.6042$
(4--7'+3$6+5.4(+$;*.)$9.))+2($)0$*04(+$*073($'($/0)$
)*+$/496+2$01$3077.2($)*+C$+.2/$K90/+C$;.:+$2.)+M$
64)$;*.)$)*+C$5./$64C$;')*$)*0(+$3077.2(
®I*+$\4./)')C$01$7.6042$(4--7'+($increases%.($)*+$2+.7$
;.:+$2.)+$increases%-)*+$(4--7C$01$7.6042$542=+$
(70-+($4-;.23
®8)$.$*':*+2$;.:+$2.)+N$902+$-+0-7+$5*00(+$)0$;02L$
./3$902+$-+0-7+$5*00(+$)0$;02L$70/:+2$*042($'1$)*+C$
5./$+.2/$902+$-+2$*042R
HLabour$Market$Equilibrium
®I*+$-2'5+$01$7.6042$'($)*+$2+.7$ ;.:+$2.)+
®I*+$1025+($01$(4--7C$./3$3+9./3$0-+2.)+$'/$7.6042$
9.2L+)($U4()$.($)*+C$30$'/$9.2L+)($102$:003($./3$
(+2='5+($)0$+7'9'/.)+$(*02).:+D(42-74(
®J4)$.$(*02).:+$02$(42-74($'/$7.6042$0/7C$62'/:($.$
:2.34.7$5*./:+$'/$2+.7$;.:+$2.)+
T1$)*+2+$'($.$(*02).:+$'/$7.6042N$)*+$2+.7$;.:+$
2.)+$2'(+($)0$+7'9'/.)+$')
T1$)*+2+$'($.$(42-74($'/$7.6042$)*+2+$'($1.77$'/$)*+$
2+.7$;.:+$2.)+$)0$+7'9'/.)+$')
®<*+/$)*+2+$'($/+')*+2$02$(42-74($02$(*02).:+$)*+$
7.6042$9.2L+)$'($'/$+\4'7'62'49$%.$1477$+9-70C9+/)$
+\4'7'62'49
-Potential$GDP
]04`=+$(++/$)*.)$)*+$-20345)'0/$14/5)'0/$)+77($4($)*+$\4./)')C$01$2+.7$
?@A$)*.)$.$:'=+/$.904/)$01$7.6042$5./$-20345+
§I*+$\4./)')C$01$2+.7$?@A$-20345+3$'/52+.(+($.($)*+$\4./)')C$01$
7.6042$'/52+.(+(
§8)$)*+$+\4'7'62'49$\4./)')C$01$7.6042N$)*+$+50/09C$'($.)$1477$
+9-70C9+/)N$./3$)*+$\4./)')C$01$2+.7$?@A$.)$1477$+9-70C9+/)$'($
-0)+/)'.7$?@A
HO0$)*+$1477$+9-70C9+/)$\4./)')C$01$7.6042$-20345+($
-0)+/)'.7$?@A
-What$Makes$Potential$GDP$grow?
<+$5./$3'='3+$.77$)*+$1025+($)*.)$9.L+$-0)+/)'.7$?@A$:20;$'/)0$);0$
5.)+:02'+(
§Growth$of$the$supply$of$labour
H<*+/$)*+$(4--7C$01$7.6042$:20;(N$)*+$(4--7C$01$7.6042$
542=+$(*'1)($2':*);.23N$./3$)*+$\4./)')C$01$7.6042$.)$.$:'=+/$
2+.7$;.:+$2.)+$'/52+.(+(
HI*+$\4./)')C$01$7.6042$'($)*+$/496+2$01$;02L+2($+9-70C+3$
947)'-7'+3$6C$.=+2.:+$*042($-+2$;02L+2
®I*+$/496+2$+9-70C+3$+\4.7($)*+$+9-70C9+/)$
-0-47.)'0/$2.)'0$947)'-7'+3$6C$)*+$;02L'/:$.:+$
-0-47.)'0/N$3'='3+3$6C$"EE
HO0$)*+$\4./)')C$01$7.6042$5*./:+($.($.$2+(47)$01$5*./:+($'/a
®8=+2.:+$*042($-+2$;02L+2
®I*+$+9-70C9+/)%)0%-0-47.)'0/$2.)'0
®I*+$;02L'/:$.:+$-0-47.)'0/
H8=+2.:+$*042($-+2$;02L+2($*.=+$3+52+.(+3$.($)*+$
;02L;++L$6+509+($(*02)+2N$./3$)*+$+9-70C9+/)$)0$
-0-47.)'0/$2.)'0$*.($'/52+.(+3$.($902+$;09+/$*.=+$
+/)+2+3$)*+$7.6042$1025+
HI*+$5096'/+3$+11+5)$01$)*+(+$);0$1.5)02($*.($L+-)$.=+2.:+$
*042($-+2$;02L'/:$.:+$-+2(0/$K.-20,RM$50/()./)
H?20;)*$'/$)*+$(4--7C$01$7.6042$*.($509+$1209$:20;)*$'/$
)*+$;02L'/:$.:+$-0-47.)'0/
®T/$)*+$70/:$24/N$:20;)*$01$;02L'/:$-0-47.)'0/$:20;($
.)$)*+$(.9+$2.)+$.($)0).7$-0-47.)'0/
HEffects$of$population$Growth
®A0-47.)'0/$:20;)*$62'/:($:20;)*$'/$)*+$(4--7C$01$
7.6042N$64)$')$30+($/0)$5*./:+$)*+$3+9./3$102$7.6042$
02$)*+$-20345)'0/$14/5)'0/
®I*+$+50/09C$5./$-20345+$902+$04)-4)$6C$4('/:$
902+$7.6042N$64)$)*+2+$'($/0$5*./:+$'/$)*+$\4./)')C$
01$2+.7$?@A$)*.)$.$:'=+/$\4./)')C$01$7.6042$5./$
-20345+
®<')*$./$'/52+.(+$'/$)*+$(4--7C$01$7.6042$./3$/0$
5*./:+$'/$)*+$3+9./3$102$7.6042N$2+.7$ ;.:+$2.)+$1.77($
./3$+\4'7'62'49$\4./)')C$01$7.6042$'/52+.(+(
®I*+$'/52+.(+3$\4./)')C$01$7.6042$-20345+($902+$
04)-4)$./3$-0)+/)'.7$?@A$'/52+.(+(
§Growth$of$labour$productivity
HLabour$productivity$$'($)*+$\4./)')C$01$2+.7$?@A$-20345+3$
6C$./$*042$01$7.6042
HT)$'($5.7547.)+3$6C$3'='3'/:$2+.7$?@A$6C$.::2+:.)+$7.6042$
*042(
HFor$example:$'1$2+.7$?@A$'($F"#EE$6'77'0/$./3$.::2+:.)+$
*042($.2+$&E$6'77'0/N$7.6042$-20345)'=')C$'($FG!$./$*042
H<*+/$7.6042$-20345)'=')C$:20;(N$2+.7$?@A$-+2$-+2(0/$
:20;($./3$62'/:($.$2'('/:$()./3.23$01$7'='/:
HEffects$of$an$increase$in$labour$productivity:
®T1$7.6042$-20345)'=')C$'/52+.(+(N$-20345)'0/$
-0(('6'7')'+($+,-./3
®I*+$\4./)')C$01$2+.7$?@A$)*.)$./C$:'=+/$\4./)')C$01$
7.6042$5./$-20345+$'/52+.(+(
®T1$7.6042$'($902+$-20345)'=+N$1'29($.2+$;'77'/:$)0$-.C$
102$902+$.$:'=+/$/496+2$01$*042($01$7.6042$(0$)*+$
3+9./3$102$7.6042$'/52+.(+(
®<')*$./$increase%'/$)*+$3+9./3$102$7.6042$./3$no%
change%in%the%supply%of%labour%N$)*+$2+.7$;.:+$2.)+$
2'(+($./3$)*+$\4./)')C$01$7.6042$(4--7'+3$'/52+.(+(
®I*+$+\4'7'62'49$\4./)')C$01$7.6042$.7(0$'/52+.(+(
O0$./$'/52+.(+$'/$7.6042$-20345)'=')C$'/52+.(+($
-0)+/)'.7$?@A$102$);0$2+.(0/(a
}P.6042$'($902+$-20345)'=+
}d02+$7.6042$'($+9-70C+3
Chapter(22.1-3:(Economic(Growth
I*42(3.CN$W+624.2C$ &N$&E"Z Ga!"$Ad
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