AP Economics
Mr. Bernstein
Module 37:
Long Run Economic Growth
March 2016
AP Economics
Mr. Bernstein
Long Run Economic Growth
Objectives - Understand each of the following:
•
•
•
•
•
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
2
AP Economics
Mr. Bernstein
Real GDP Per Capita
• Real to separate changes in total goods and services
from effects of changes in price levels
• Per Capita to isolate
effects of changes in
population
• Usually not policy goal
• Related to standards
of living
3
AP Economics
Mr. Bernstein
Real GDP Per Capita
4
AP Economics
Mr. Bernstein
Growth Rates
• Growth rates compound
• Rule of 70:
• 70/growth rate
= number of
years for GDP
to double
5
AP Economics
Mr. Bernstein
Why do some economies grow faster than
others?
• Productivity, productivity, productivity
• Real GDP Per Capita only grows when the average
output per worker grows
• How can worker productivity increase?
• Physical Capital – ie better tools or software
• Human Capital – ie better training or educations
• Technology – ie application of knowledge
6