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Understanding Long-Run Economic Growth: Key Factors and Measurements

This module delves into long-run economic growth, focusing on how we measure it, the changes in real GDP over time, and variations across countries. Key sources of growth include physical capital, human capital, and technological progress, all of which drive productivity. Additionally, we explore real GDP per capita to distinguish between total output changes and price level effects, as well as the importance of growth rates and the Rule of 70 in understanding economic dynamics. Gain insights into why some economies experience faster growth than others.

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Understanding Long-Run Economic Growth: Key Factors and Measurements

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  1. AP Economics Mr. Bernstein Module 37: Long Run Economic Growth April 7, 2014

  2. AP EconomicsMr. Bernstein Long Run Economic Growth Objectives - Understand each of the following: • How we measure long-run economic growth • How real GDP has changed over time • How real GDP varies across countries • The sources of long-run economic growth • How productivity is driven by physical capital, human capital, and technological progress

  3. AP EconomicsMr. Bernstein Real GDP Per Capita • Real to separate changes in total goods and services from effects of changes in price levels • Per Capita to isolate effects of changes in population • Usually not policy goal • Related to standards of living

  4. AP EconomicsMr. Bernstein Real GDP Per Capita

  5. AP EconomicsMr. Bernstein Growth Rates • Growth rates compound • Rule of 70: • 70/growth rate = number of years for GDP to double

  6. AP EconomicsMr. Bernstein Why do some economies grow faster than others? • Productivity, productivity, productivity • Real GDP Per Capita only grows when the average output per worker grows • How can worker productivity increase? • Physical Capital – ie better tools or software • Human Capital – ie better training or educations • Technology – ie application of knowledge

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