1Econ 101 M. SalemiEcon 101 M. SalemiEconomic Growth and ProductivityEconomic Growth and ProductivityNewsNewsUnemployment ReduxUnemployment ReduxNations Have Experienced a Substantial Rise in Nations Have Experienced a Substantial Rise in Living Standards Over the Last 150 Years.Living Standards Over the Last 150 Years.Labor Productivity Accounts for a Great Deal of the Labor Productivity Accounts for a Great Deal of the Observed Increase in Living Standards.Observed Increase in Living Standards.There Are Several Factors that Contribute to There Are Several Factors that Contribute to Growth in Labor Productivity.Growth in Labor Productivity.Economic Growth Entails Costs As Well As Economic Growth Entails Costs As Well As Benefits.Benefits.What Have We Learned?What Have We Learned?NewsEcon 101 M. SalemiEcon 101 M. SalemiMeasuring UnemploymentMeasuring Unemploymentforce laborunemployed rate ntUnemployme =over and 16 populationforce labor rate ionParticipat = Civilian Unemployment and Participation Rates0.02.04.06.08.010.012.0Jan-48Jan-50Jan-52Jan-54Jan-56Jan-58Jan-60Jan-62Jan-64Jan-66Jan-68Jan-70Jan-72Jan-74Jan-76Jan-78Jan-80Jan-82Jan-84Jan-86Jan-88Jan-90Jan-92Jan-94Jan-96Jan-98Jan-00Jan-02Jan-04Jan-06Jan-08Percent52.054.056.058.060.062.064.066.068.0Participation Rate (Right Axis)Unemployment Rate (Left Axis)2Econ 101 M. SalemiEcon 101 M. SalemiUse Your Clickers to Answer Use Your Clickers to Answer The Following The Following Graded Question.Graded Question.Econ 101 M. SalemiEcon 101 M. SalemiA rising unemployment rate may A rising unemployment rate may understate the impact of a recession understate the impact of a recession on the economy because on the economy because ……A.A.The unemployment rate does not typically rise The unemployment rate does not typically rise in a recession.in a recession.B.B.Inflation typically increases during a recession.Inflation typically increases during a recession.C.C.Some workers may leave the labor force and not Some workers may leave the labor force and not be reflected in the unemployment rate.be reflected in the unemployment rate.D.D.The unemployment rate does not include The unemployment rate does not include unemployment among female workers.unemployment among female workers.Economic Growth andProductivity Econ 101 M. SalemiEcon 101 M. SalemiReal GDP per Person In Selected Real GDP per Person In Selected Countries, 1870Countries, 1870--2003 (in 2000 U.S. Dollars)2003 (in 2000 U.S. Dollars)CountryAustralia 5,512 7,236 9,369 17,670 28,312 1.2 2.1Canada 2,328 5,509 8,906 19,882 29,201 1.9 2.3France 2,291 4,484 6,164 18,138 26,176 1.8 2.8Germany 1,152 2,218 4,785 17,222 25,271 2.3 3.2Italy 2,852 4,018 5,128 16,912 25,458 1.7 3.1Japan 931 1,763 2,141 16,329 26,636 2.6 4.9United Kingdom 3,892 5,976 8,709 16,557 26,852 1.5 2.1United States 2,887 6,852 12,110 22,835 35,488 1.9 2.0Annual % change 1950-2003Annual % change 1870-20031870 1913 1950 1979 20033Real GDP per Person, 1870-2003 (in 2000 US Dollars)Growth is a Compounding ProcessThe growth path of real GDP in industrialized nations is exponential.Small differences in exponential growth rates make for big eventual differences in real GDP.Econ 101 M. SalemiEcon 101 M. Salemi4Econ 101 M. SalemiEcon 101 M. SalemiUse Your Clicker To Answer The Use Your Clicker To Answer The Following Following Graded Question.Graded Question.The average annual growth rate of US real GDP between 1947 and 2009 is about _______ per cent. In the past year the growth rate of real GDP has been _____ than average.A. 1, lessB. 1/4, lessC. 1, greaterD. 1/4, greaterEcon 101 M. SalemiEcon 101 M. SalemiWhat Determines the Growth Rate?What Determines the Growth Rate?LetLetY = Real GDPY = Real GDPN = Number of WorkersN = Number of WorkersP = PopulationP = PopulationOutput per capita depends on labor productivity Output per capita depends on labor productivity and the fraction of the population that works.and the fraction of the population that works.POPNxNYPOPY=Econ 101 M. SalemiEcon 101 M. SalemiGrowth in Labor Productivity Accounts Growth in Labor Productivity Accounts for Most Growth in Output Per Capita.for Most Growth in Output Per Capita.5Econ 101 M. SalemiEcon 101 M. SalemiIncreases in the Participation Rate Account Increases in the Participation Rate Account for Some Growth in Output per Capita.for Some Growth in Output per Capita.Econ 101 M. SalemiEcon 101 M. SalemiIncreases in Labor Productivity Can Increases in Labor Productivity Can Be Accounted for byBe Accounted for by……Increases in the quality and quantity of Increases in the quality and quantity of physical capital that workers use. physical capital that workers use. Increases in human capital that help Increases in human capital that help workers work smarter.workers work smarter.Using more land and other natural resources Using more land and other natural resources in the production process. in the production process. Advances in technology and inventions.Advances in technology and inventions.Econ 101 M. SalemiEcon 101 M. SalemiIncreases in Labor Productivity also Increases in Labor Productivity also are Promoted by are Promoted by ……Increases in the quality of Increases in the quality of entrepreneurship and managemententrepreneurship and managementandandA Political and Legal Environment A Political and Legal Environment compatible with growth.compatible with growth.Econ 101 M. SalemiEcon 101 M. SalemiThere are Large National Differences There are Large National Differences In Capital Available to WorkersIn Capital Available to Workers6Econ 101 M. SalemiEcon 101 M. SalemiThere Are Large National Differences There Are Large National Differences In EducationIn EducationEcon 101 M. SalemiEcon 101 M. SalemiUse Your Clicker To Answer Use Your Clicker To Answer The Following The Following Graded Questions.Graded Questions.Econ 101 M. SalemiEcon 101 M. SalemiIn accounting for growth in US In accounting for growth in US output per capitaoutput per capita……A.A.Growth in labor productivity is more Growth in labor productivity is more important.important.B.B.Growth in the fraction of the population Growth in the fraction of the population is more important.is more important.C.C.Neither labor productivity nor changes in Neither labor productivity nor changes in the willingness to work are important.the willingness to work are important.D.D.Growth in labor productivity and in the Growth in labor productivity and in the fraction of the population that