Long run economic growth
Student Guide
Name
WE JUST finished section 6
THE LESSON GOAL ISto illustrate
•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
1. DEFINE GDP Per Capita.
2. WATCH this video which illustrates a of the reason GDP per capita is not necessarily an accurate reflection of the true standard of living in a country.
URL:
3.APPLY the Rule of 70 which approximates how many years it will take for the economy to double at a given rate of economic growth; # of years for a number to double = (70/annual growth rate of that number)
Q: Our GDP is 2005 was 12.5 trillion. Our GDP in 2011 was 15 trillion. This gives us a growth rate of 4.1% over six years. Using the rule of 70 and assuming the same growth rate, how long will it take before our GDP doubles?
Q: Assume our GDP growth will be 3%, how long before our economy doubles?
Q: Assume our GDP growth will be 2.2%, how long before our economy doubles?
4. PROVIDE examples of the three main sources labor productivity, which is what provides long term economic growth.
• Physical capital – example (hammer to nail instead of your hand)
• Human capital – example (training to be more effective on the job)
• Technology – example (communicating via email)
Q: REFLECT on your anticipated career choice. Provide an example of physical capital, human capital, and technology that will make you better at your job.
5. SHARE your choices with the classroom.
FORMATIVE ASSESSMENT
• Provide one FISCAL policy that can be made and one MONETARY policy that can be made to boost productivity, thus boosting GDP growth; prepare to SHARE with the class. (Is it demand side or supply side?)
HOMEWORK: Read modules 38 and 39
TOMORROW WE WILL discuss
•How changes in productivity are illustrated using an aggregate production function
•How growth has varied among several important regions of the world and why the convergence hypothesis applies to economically advanced countries