ECO 2013 Chapter Notes - Chapter 8: Malthusianism, Human Capital, Paul Romer

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Economic growth: the expansion of production possibilities. Growth rate: the annual percentage change of a variable- the change in the level expressed as a percentage of the initial level, real gdp growth rate. Real gdp in current year minus real gdp in previous year divided by real gdp in previous year times 100. Same formula as above just replacing real gdp with real gdp per person: if the growth rate of the population exceeds the growth rate of real gdp, then real. Gdp per person falls: real gdp per person grows only if real gdp grows faster than the population grows. Economic growth versus business cycle expansion: real gdp increases for two reasons. The economy might be returning to full employment in an expansion phase of the business cycle: not economic growth. Potential gdp might be increasing: economic growth. Earning interest on the interest you earned before.

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