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| QUICK REVIEW 18-1 |
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- Economic growth can be measured as (a) an
increase in real GDP over time or (b) an increase in real GDP per capita over time.
- Graphically
economic growth is shown as (a) an
outward shift of a nation's production possibilities curve (accompanied by movement from
some point on the old curve to a point on the new curve)
or (b) combined rightward shifts
of the long-run aggregate supply curve
the short-run aggregate supply curve
and the
aggregate demand curve.
- Growth of real GDP in the United States has
averaged slightly more than 3 percent annually since World War II.
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| QUICK REVIEW 18-2 |
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- Improvements in labor productivity account for
about two-thirds of increases in U.S. real GDP; the use of more labor inputs accounts for
the remaining one-third.
- Improved technology
more capital
greater
education and training
and better resource allocation have been the main contributors to
U.S. economic growth.
- The average annual growth rate in the United
States has been diminished by periods of depression and recession.
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| QUICK REVIEW 18-3 |
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- Economists have cited the following reasons for
the U.S. slow-down in productivity over the past 25 years: (a) declines in labor quality
(b) a slowing of technological progress
(c) decreasing investment spending as a
percentage of GDP
(d) high energy prices during the 1970s and early 1980s
and (e)
lagging growth of service productivity.
- Some observers see the recent upsurge in
productivity as evidence of a "new economy" that can achieve higher rates of GDP
growth than those in the past two decades. This new economy is based on innovation in
computers and communications coupled with the globalization of capitalism.
- Skeptics of the new-economy view say that it is
far too early to tell whether the recent upsurge of productivity growth is transient or
permanent.
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