1. Section 7

2. Economic Growth productivity, productivity, productivity!

3. Key Terms Rule of 70 Labor Productivity Physical Capital Human Capital
Technology
Aggregate Production Function
Diminishing Returns to Physical Capital
Growth Accounting
Total Factor Productivity
Convergence Hypothesis
Research and Development
Infrastructure
Sustainable
Depreciation

4. Key Formulas Rule of 70 # of years for a # to double = 70_______
annual growth rate
RGDP per capita = RGDP/population
Labour Productivity = real GDP______
# of people working

5. Key Graphs
Productivity
Physical Capital
Technology
Human Capital

6. Aggregate Production Function

7. Law of Diminishing Returns

8. Economic Growth in the Production Possibilities Curve

9. Economic Growth in the AD AS Model

10. AP Exam Tips
Productivity is the most important factor that changes economic growth. Productivity is impacted by improvements in human capital and technology.
If you’re asked to identify a source of economic growth, “increased investment in physical capital” is a good answer. Don’t say “increased investment” – that is to ambiguous.
Recognize the diminishing returns to physical capital can only be measured accurately if other factors like technology and human capital per worker are held constant.
Growth rates between nations differ due to differing levels of physical capital, human capital, and technology. Past AP exams have tested economic growth concepts, but not actual growth rates.
Don’t automatically assume that government spending will have an impact on economic growth. Some government spending is on things that are not sources of economic growth.
Understanding sustainability may be useful in answering free-response questions (and to the survival of the human race).
You should be able to draw a correctly labeled PPC and show economic growth with an outward shift.
Shifting LRAS is another way to show a change in economic growth because LRAS shows the potential output of an economy.