Why do Economies Grow为什么经济增长.pptVIP

Productivity Economic Growth Why Productivity Matters! Production and Growth 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! Goal is to get PPF curve to shift right! Productivity Productivity refers to the amount of output (goods services) produced from each unit of input (labor, physical capital) largely determines standard of living Standard of Living Productivity ↑ 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 directly to Strong GDP growth in 1980’s 90’s without inflation Critical Factors for 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 capital rises, the extra output produced from an additional unit of capital falls. Hard for USA To increase Productivity