Why do Economies Grow rhsweb为什么经济增长rhsweb.pptVIP

Productivity Economic Growth Why Productivity Matters! GDP Standard of Living Standard of living depends on a country’s ability to produce goods services Real GDP per person has ↑ 2 % per year in USA over last 100 years! To ↑ Standard of Living PPF curve must shift right! Productivity per worker must rise! Real Growth Per Worker - - GDP Per Worker % (per capita) Growth Rate Productivity = Efficiency Productivity refers to the amount of output (goods services) produced from each unit of input (labor, physical capital, etc) largely determines standard of living rising productivity leads to rising wealth Standard of Living Productivity (efficiency) ↑ More goods produced with same resources Determinants of Productivity Factors of production determine productivity: Physical capital Human capital Natural resources Technological knowledge USA has led the world in technology/ Internet Led to strong GDP growth in 1980’s 90’s Are Robotics are future? Critical Factors for real GDP Growth Property rights are a prerequisite for a market system to work Savings Investment Gov’t incentives to save promote business investment (I) Research Development: Most technological advance comes from private research by firms/individual inventors Educated workforce: necessary for today’s high technology economy Diminishing Returns of Capital Output per worker 1 1 Capital per worker 1. When the economy has a low level of capital, an extra unit of capital leads to a large increase in output. 2. When the economy has a high level of capital, an extra unit of capital leads to a small increase in output. As the stock of physical capital rises, the extra output produced from an additional unit of capital falls. Hard for USA to increase Productivity GDP Gov’t Policy Gov’t policies to raise productivity: Encourage saving investment Encourage investment from abroad. Encourage education/training Establish property rights political stability Promote free trad