Transcript LR economic growth Macro_Module_37 LR economic growth

Module 37
Long-run
Economic Growth
KRUGMAN'S
MACROECONOMICS for AP*
Margaret Ray and David Anderson
What you will learn
in this Module:
• 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
Real GDP per Capita
•Real GDP per Capita – real GDP/population size
•Not a policy goal unto itself
Real GDP per Capita (Continued)
Growth Rates
Rule of 70
How many years
it will take for the
economy to
double at a
given rate of
economic
growth.
# of years to
double =
(70/annual
growth rate of
the number)
Rule of 70
The Sources of Long-Run
Growth
• Labor productivity and growth
• Sustained growth in real GDP per capita
occurs only when the amount of output
produced by the average worker
increase steadily.
• Physical Capital – tools
• Human Capital – education/training
• Technology – collective body of
knowledge used to build useful devices –
GPS system.