Macroeconomics - CH24 Long-Run Economic Growth
Macroeconomics - CH24 Long-Run Economic Growth
Macroeconomics - CH24 Long-Run Economic Growth
Kartei Details
| Karten | 17 |
|---|---|
| Sprache | English |
| Kategorie | VWL |
| Stufe | Universität |
| Erstellt / Aktualisiert | 05.10.2020 / 05.10.2020 |
| Weblink |
https://card2brain.ch/box/20201005_macroeconomics_ch24_longrun_economic_growth
|
| Einbinden |
<iframe src="https://card2brain.ch/box/20201005_macroeconomics_ch24_longrun_economic_growth/embed" width="780" height="150" scrolling="no" frameborder="0"></iframe>
|
Explain the term real GDP per capita
The real GDP per capita is the real GDP divided by the population size. We focus on real GDP per capita because we want to isolate the effect of changes in the population.
What is the Rule of 70?
The Rule of 70 is a mathematical formula that tells us how long it takes real GDP per capita, or any other variable that grows gradually over time, to double.
Long-run economic growth depends almost entirely on one ingredient. Which one?
Rising productivity
Explain the term labor productivity, or productivity for short.
The term labor productivity, or productivity for short, is used to refer either to output per worker or, in some cases, to output per hour. For the economy as a whole, productivity – output per worker – is simply real GDP divided by the number of people working.
What are the three main reasons the average worker produces far more than his or her counterpart a century ago?
- Increase in Physical Capital (better equipment)
- Increase in Human Capital (better education and knowledge)
- Technological Progress (better technologies)
What is the aggregate production function?
The aggregate production function (or GDP per worker) shows how productivity depends on the quantities of physical capital per worker, human capital per worker and the state of technology. It allows economists to disentangle the effects of these three factors on overall productivity.
Explain the term diminishin returns to physical capital
Diminishing returns to physical capital is an “other things equal” phenomenon: additional amounts of physical capital are less productive when the amount of human capital per worker and the technology are held fixed! Diminishing returns may disappear if we increase the amount of human capital per worker, or improve the technology, or both at the same time the amount of physical capital per worker is increased.
That is, when the amount of human capital per worker and the state of technology are held fixed, each successive increase in the amount of physical capital per worker leads a smaller increase in productivity.
Economies with rapid growth tend to be economies that add physical capital, increase their human capital, or experience rapid technological progress. Evidence also points to the importance of __________, __________, and __________ in fostering the sources of growth.
government policies, property rights political stability, and good governance
Government policies can increase the economy’s growth rate through four main channel. Name them.
- Government Subsidies to Infrastructure (roads, power lines, ports, informatin networks, clean water supplies etc.)
- Government Subsidies to Education (government spending on education)
- Government Subsidies to R&D (important R&D is done by goernment agencies)
- Maintaining a Well-Functional Financial System (making high rates of private investment spending possible)
Explain the terms Property rights and intellectual property rights
Property rights are the rights of owners of valuable items to dispose of those items as they choose. A subset, intellectual property rights, are rights of an innovator to accrue the rewards of her innovation.
The state of property rights generally, and intellectual property rights in particular, are important factors in explaining differences in growth rates across economies. That’s because no one would bother to spend the effort and resources required to innovate if someone else could appropriate the innovation and capture the rewards.
Explain the term patent
A patent is a government-created temporary monopoly given to an innovator for the use or sale of his or her innovation. It’s a temporary rather than permanent monopoly because while it’s in society’s interests to give an innovator an incentive to invent, it’s also in society’s interest to eventually encourage competition.
To reduce the global emission of greenhouse gases, developed countries and large rapidly developing countries (e.g. China or India) will have to undertake a transition from a heavy reliance on fossil fuels to greater use of clean, renewable energy sources such as wind and solar power. We refer to this process as __________.
the great energy transition.
Calculate the ratio of per capita GDP in 2015 of the following:
i. Middle-income to high-income countries
ii. Low-income to high-income countries
iii: Low-incom to middle-income countries
i. 4,584 / 41,038 = 0.112 = 11.2%
ii. 588 / 41,038 = 0.014 = 1.4%
iii. 588 / 4,584 = 0.128 = 12.8%
Calculate the number of years it will take the low-income and middle-income countries to double their per capita GDP.
Middle-income countries: 70/4.4 = 15.9 years
Low-income countries: 70/2.3 = 30.4 years
Calculate the per capita GDP of each of the regions in 2085
(Hint: How many times does their per capita GDP double in 70 years, the number of years from 2015 to 2085?)
High-income countries: 41,038 x 2 = 82,076
Middle-income countries: 4,584 x 2 x 2 x 2 x 2 = 73,344
Low-income countries: 588 x 2 x 2 = 2,352
Using the data in the accompanying table, draw the two production functions in one diagram. Androde's current amount of physical capital per worker is 100. In your figure, label that point A.
- Rank the countries in terms of their growth in CO2 emissions, from highest to lowest. What fice countries have the highest growth rate in emissions? What fice countries have the lowest growth rate in emmissions?
- Now rank the countries interms of their growth in real GDP per capita, from highest to lowest. What fice countries have the highest growth rate? What five countries have the lowest growth rate?
- Would you infer from your results that CO2 emissions are linked to growth in output per capita?
- Do high growth frates necessarily lead to high CO2 emissions?
- Why do certain countries manage to run below (UK, Nigeria) trend line and other not (Japan, Korea, China)?
- Highest: China, Bangladesh, South Korea, Russia, Argentia
Lowest: Ireland, UK, Nigeria, US, Mexico - Highest: China, Nigeria, Bangladesh, Russia, South Korea
Lowest: Mexico, Japan, US, Canada, UK - Yes. Four of the fice countries with the highest growth rate in per capita CO2 emissions also have the highest growth rate in real GDP per capita: China, Bangladesh, Russia, and South Korea. Three of the five countries with the lowst growth rate in per capita CO2 emmissions also have the lowest growth rate in real GDP per capita: the US, Mexico, and the UK.
- Although growth rates in GDP per capita and CO2 emissions per capita are linked, the experience of Nigeria and, to a lesser extent, Ireland shows that it is possible both to have a high growth rate of GDP and to reduce CO2 emissoins. This can be done in a variety of ways, including using alternative energy sources and better designs for buildings and automobiles. Estimates suggest that large CO2 reductions would put only a minor dent in long-run GDP per capita growth.
- Some reasons:
- Some countries "outsourced" (UK) heavy industry to other countries (China) some not (Japan, Korea)
- Some Countries have high GDP per capita as a result of being commodity exporters starting from a very low level (Nigeria)
-
- 1 / 17
-
