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UNC-Chapel Hill ECON 101 - Chapter 25

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Lecture Outline – Economic GrowthA. Name 3 key facts about the wealth of nations and economic growth.1. GDP per Capita varies enormously among nations2. Everyone used to be poor3. There are growth miracles and growth disasters4. What percentage of the world’s population lives in a country with an annual GDP per capita of less than $1000 per year? In what region of the world are most of the poor-est countries located?a. 8%. Africa/Nigeria specificallyb.World’s average level of GDP per capita in 2000 was $9,1335. How has GDP per capita changed across time (i.e. since the 1st century) in different regions of the world? Which regions have experienced the most growth? Which re-gions have experienced the least growth? a. Western Europe and U.S. : most growthb.African countries, China, India, Latin America, Former USSR: least growthc. GDP per capita has increased but there was no long-run growth in real per capita GDPd.Economic growth : the growth rate of real GDP per capitai. G = y(t) - y(t-1)/y(t-1) x 100. y(t) os real per capita GDP in period t6. What is a growth miracle? What is a growth disaster? Give an example of each.a. Ex. Japan is one of the poorest countries after WWII but then in the 1950shas tremendous growth and catches up to the U.S. b.With the right factors and resources/institutions a country which is behind the frontier can catch up much more quickly to U.S. level of growthc. Growth Disaster: a country which as not grown in a long time. Nigeria, Argentina7. Higher levels of GDP per capita are associated with a higher standard of living. Give examples of indicators that tend to increase as a nation’s wealth increases.a. Correlates with desirable attributes like leisure time, more democracy, greater women's rights, longer life expectancy.1b.County’s life expectancy can be higher without GDP growing that much. They devote more resources to different factors like healthcare that in-crease life expectancy.8. What percentage of the world’s population lives in a country with an annual GDP per capita of less than the world average?a. 80%9. What is the rule of 70? What does this rule tell us? a. If the annual growth rate of a variable is x% then the doubling time is 70/x years.b.US GDP per capita growth rate is 2% per yearc. China: 10% per year means they are doubling every 7 years. China is still poorer than the US so it shows that in the past, China was very poord.Medical spending in the U.S is growing 2% faster than US GDP per capita10. What is compounding? Give an example of how a small improvement in a nation’s growth rate can add up fast.a. Compounding/Exponential growth: growth builds on top of growth.B. Understanding the Wealth of Nations1. What are the 3 primary factors of production?a. Physical Capital, Human Capital, Technological knowledgei. Organization is critical in the 3 primary factors of production.b. What is the difference between physical capital and human capital? Give an ex-ample of each. How do these factors of production affect the productivity of workers?i. Physical Capital: the stock of tools including machines, structures, and equipmentii. Human Capital: tools of the mind. Productive knowledge and skills that workers acquire through education, training, and experience. Produced by an investment of timec. What is technological knowledge? How does it differ from human capital?i. Technological knowledge: knowledge about how the world works that is used to produce goods and services2ii. Increase technological knowledge with research and development2. What is an institution? a. The ‘rules of the game’ that structure economic incentivesb. Name 5 key institutions for economic growth. i. Property rightsa. Make you responsible for decisions. b. Encourages conservationc. Free rider: someone who consumes a resource without working or contributing to the resource’s upkeepd. Well defined, defendable, divestible (exchange with other people)e. Help us trade wiht each other, encourage investment, dis-courage waste, create incentives for conservationii. Rule of Lawiii. Free pressiv. Honest governmentv. Open marketsvi. Trustc. Explain why institutions ultimately affect the decision to invest in the factors of production.d. Explain why two countries can have different rates of growth because their insti-tutions differ.i. History, geography,


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UNC-Chapel Hill ECON 101 - Chapter 25

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