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Economic Growth

This overview examines the economic growth of the US between 1994 and 2004, highlighting a notable 38% increase in real GDP. It emphasizes the importance of real GDP per capita as a measure of living standards and quality of life, discussing how capital deepening—both physical and human—fuels productivity and wage growth. The role of savings and investment, as well as the impact of government policies, population dynamics, and technological advancements, are analyzed to reveal driving forces behind economic expansion.

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Economic Growth

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  1. Economic Growth US Growth over time

  2. Growth • 1994-2004 saw a 38% growth in real GDP • As populations grow GDP must also • Real GDP per capita- real GDP divided by total population. (per capita=per person). • This can help determine standard of living and comparing nations. • Standard of living and quality of life • Consistent rise in Real GDP should improve them

  3. Capital deepening • Process of increasing the amount of capital per worker- • Physical capital=equipment for production • Human capital=training and education for workers • Increase in output and worker’s wages • Growth will occur in economy. More workers= more productivity=more good=more money

  4. Savings and InvestmentCapital Deepening • Savings-income not used for consumption • Savings rate- proportion of disposable income that is saved. • Complete figure 12.14 on page 321 • Savings in retirement, banks, ultimately investments • Banks and mutual funds make $$$$$ available to firms for capital deepening

  5. Other examples Population impact *India- large population but little capital deepening *China- large population and increasing capital deepening Government effects- taxing = less investment Trade deficit can also hurt investment in economy

  6. Technology • Advance in technology will help with growth • Technological progress- increasing efficiency by producing more without using more input • Computers, robotics, new methods, etc,, • 4 causes • 1. Research 2. innovations • 3. Scale of market 4. Education & Experience • 5. Natural resources

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