2.4.3
Economic Growth & Productivity
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Economic Growth and Productivity
To analyze the sources of economic growth, it is useful to think about a production function, which is the technical relationship by which economic inputs like labor and machinery are turned into outputs.
The aggregate production function defined
- A microeconomic production function describes a firm's or perhaps an industry's inputs and outputs.
- In macroeconomics, we call the connection from inputs to outputs for the entire economy an aggregate production function.
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Components of the aggregate production function
- An aggregate production function shows what goes into producing the output for an overall economy.
- This aggregate production function has GDP per capita as its output, and shows three inputs which each influence the output.
- The function shows that output per capita (i.e. productivity) is positively related to physical capital, human capital and improvements in technology.
Measuring productivity
- An economy’s rate of productivity growth is closely linked to the growth rate of its GDP per capita, although the two are not identical. For example, if the percentage of the population who holds jobs in an economy increases, GDP per capita will increase but the productivity of individual workers may not be affected.
- Over the long term, the only way that GDP per capita can grow continually is if the productivity of the average worker rises or if there are complementary increases in capital.
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Measuring productivity
- A common measure of U.S. productivity per worker is dollar value per hour the worker contributes to the employer’s output.
- The chart above shows an index of output per hour, with 2009 as the base year (when the index equals 100). The index equaled about 106 in 2014. In 1972, the index equaled 50, which shows that workers have more than doubled their productivity since then.
1Microeconomics
1.1Competitive Markets: Demand & Suply
1.2Elasticity
1.3Government Intervention
1.4Market Failure
1.4.1Types of Market Failure1.4.2Introduction to Externalities1.4.3Negative Externalities1.4.4Policy for Negative Externalities1.4.5Positive Externalities1.4.6The Deadweight Welfare Loss of Externalities1.4.7Case Study - The Externalities of Education1.4.8Public Goods & the Free-Rider Problem1.4.9Asymmetric Information1.4.10End of Topic Test - Market Failure1.4.11Application Questions - Market Failure
1.5HL: Theory of the Firm & Market Structures
2Macroeconomics
2.1The Level of Overall Economic Activity
2.2Aggregate Demand & Aggregate Supply
2.2.1The Aggregate Demand Curve2.2.2Components of Aggregate Demand2.2.3Shape of the Aggregate Demand Curve2.2.4Shifts in Aggregate Demand2.2.5IB Multiple Choice - Aggregate Demand2.2.6Short & Long-Run Aggregate Supply2.2.7Alternative Models of LRAS2.2.8Equilibrium in the AD-AS Model2.2.9Output Gaps & the AD-AS Model
2.3Macroeconomic Objectives
2.3.1Introduction to Unemployment2.3.2Limitations of Unemployment2.3.3Types of Unemployment2.3.4Causes & Impact of Unemployment2.3.5Defining Inflation2.3.6Measuring Inflation2.3.7Use of Index Numbers2.3.8The Consumer Price Index2.3.9Consequences of Inflation2.3.10Causes of Inflation2.3.11Inflation & Unemployment Tradeoff2.3.12The Short-Run Phillips Curve2.3.13The Long-Run Phillips Curve
2.4Economic Growth, Poverty & Inequality
2.5Fiscal Policy
2.6Monetary Policy
2.7Supply-Side Policies
3The Global Economy
3.1International Trade
3.2Exchange Rates
3.3The Balance of Payments
3.4Economic Integration
3.5Terms of Trade
3.6Economic Development
3.7The Role of Domestic & International Factors
3.8The Role of International Trade
3.9The Role of Foreign Aid
Jump to other topics
1Microeconomics
1.1Competitive Markets: Demand & Suply
1.2Elasticity
1.3Government Intervention
1.4Market Failure
1.4.1Types of Market Failure1.4.2Introduction to Externalities1.4.3Negative Externalities1.4.4Policy for Negative Externalities1.4.5Positive Externalities1.4.6The Deadweight Welfare Loss of Externalities1.4.7Case Study - The Externalities of Education1.4.8Public Goods & the Free-Rider Problem1.4.9Asymmetric Information1.4.10End of Topic Test - Market Failure1.4.11Application Questions - Market Failure
1.5HL: Theory of the Firm & Market Structures
2Macroeconomics
2.1The Level of Overall Economic Activity
2.2Aggregate Demand & Aggregate Supply
2.2.1The Aggregate Demand Curve2.2.2Components of Aggregate Demand2.2.3Shape of the Aggregate Demand Curve2.2.4Shifts in Aggregate Demand2.2.5IB Multiple Choice - Aggregate Demand2.2.6Short & Long-Run Aggregate Supply2.2.7Alternative Models of LRAS2.2.8Equilibrium in the AD-AS Model2.2.9Output Gaps & the AD-AS Model
2.3Macroeconomic Objectives
2.3.1Introduction to Unemployment2.3.2Limitations of Unemployment2.3.3Types of Unemployment2.3.4Causes & Impact of Unemployment2.3.5Defining Inflation2.3.6Measuring Inflation2.3.7Use of Index Numbers2.3.8The Consumer Price Index2.3.9Consequences of Inflation2.3.10Causes of Inflation2.3.11Inflation & Unemployment Tradeoff2.3.12The Short-Run Phillips Curve2.3.13The Long-Run Phillips Curve
2.4Economic Growth, Poverty & Inequality
2.5Fiscal Policy
2.6Monetary Policy
2.7Supply-Side Policies
3The Global Economy
3.1International Trade
3.2Exchange Rates
3.3The Balance of Payments
3.4Economic Integration
3.5Terms of Trade
3.6Economic Development
3.7The Role of Domestic & International Factors
3.8The Role of International Trade
3.9The Role of Foreign Aid
Practice questions on Economic Growth & Productivity
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- 1What is a common measure of U.S. productivity per worker?Multiple choice
- 2
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