2.  Key statistic to track economic growth ◦ GDP—total value of economy’s production/income ◦ Real—adjusted for inflation) ◦ per capita—to remove effect of population changes  Income of “typical” family normally grows in proportion to per capita income

3.  Long-run growth is achieved gradually  At any given annual growth rate, use Rule of 70 to determine how long it takes real GDP to double # of years to double = 70/annual growth rate

4.  Key to long-run growth is rising productivity  Output per worker (GDP/number of people working)  In the long-run, population growth tends to explain employment growth (so this is negated in growth of real GDP per capita)

5. 1. Physical capital – Increases in manufactured goods used to produce other goods & services 2. Human capital – Improvement in education, knowledge & health 3. Technology – Progress in technical means for production ◦ Increases in Total Factor Productivity are a result of technology

6.  Diminishing returns to physical capital – Increases in amount of physical capital leads to smaller increases in productivity  Diminishing returns for tech and human capital as well  Growth accounting estimates contribution of each major factor in Aggregate Production Function and separates out the effects of the 3 factors

7.  Ceteris paribus, countries with abundant valuable resources have higher RGDP per capita  In the real world, the other 3 factors are much more important determinants

8.  Read the case study on South Korea, Argentina, or Nigeria  In your groups, summarize the background info of the region’s economic status and factors that either lead to positive, stagnant, or negative economic growth on a large post- it note  Elect 1 or 2 spokespersons and report to class your findings

9. 1.East Asia grew significantly over last 30 years due to: a.high national savings rate b.very good educational system c.substantial tech progress Convergence hypothesis – Difference in real GDP per capita narrows over time because countries that start with lower GDP per capita tend to have higher growth rates

10. 2. Latin America stagnated due to: a.lower rates of savings & investment b.low education emphasis c.Irresponsible government policy 3. Sub- Saharan Africa – unsuccessful due to: a.political instability b.Poor education & infrastructure c.Steady investment spending difficult d.Lack legal safeguards for property