17 - 1 Copyright McGraw-Hill/Irwin, 2005 Growth Economics Production Possibilities Analysis Supply...
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17 - 1 Copyright McGraw-Hill/Irwin, 2005 Growth Economic s Production Poss ibilities Analy sis Supply Determin ants of Real Ou tput Growth in the A D-AS Model U.S. Economic G rowth Rates Accounting for Growth Productivity Ac celeration: A New Economy? Key Terms Previo us Slide Next Slid e End End Show Show ECONOMIC GROWTH 17 C H A P T E R
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Transcript of 17 - 1 Copyright McGraw-Hill/Irwin, 2005 Growth Economics Production Possibilities Analysis Supply...
17 - 1Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
ECONOMIC
GROWTH
17C H A P T E R
17 - 2Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
• Increases in the Quantity &
Quality of Natural Resources• Increases in the Quantity &
Quality of Human Resources• Increases in the Supply (or
Stock) of Capital Goods• Improvements in Technology
GROWTH ECONOMICSSupply Factors
17 - 3Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
•Households, Businesses, and
Government Must Purchase the
Economy’s Expanded Output
GROWTH ECONOMICSDemand Factor
Efficiency Factor
•The Economy Must Achieve
Economic Efficiency as well as
Full Employment
17 - 4Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PRODUCTION POSSIBILITIES ANALYSIS
Economic Growth
A
B
C
D
a
b
Cap
ital
Go
od
s
Consumer Goods0
17 - 5Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PRODUCTION POSSIBILITIES ANALYSIS
Growth and Production PossibilitiesLabor and Productivity
Hours of WorkLabor-Force Participation RateLabor Productivity
Real GDP =Hours
of WorkX
LaborProductivity
17 - 6Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
•Size of employed labor force•Average hours of work
•Technological advance•Quantity of capital•Education and training•Allocative efficiency•Other
REALGDP
SUPPLY DETERMINANTSOF REAL OUTPUT
LaborInputs(Hours
of Work)
LaborProductivity
(AverageOutput
Per Hour)
X =
17 - 7Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
GROWTH IN THE AD-AS MODEL
Production Possibilities and Aggregate Supply
Extended AD-AS Model
17 - 8Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
GROWTH IN THE AD-AS MODEL
A
B
C
D
Ca
pit
al G
oo
ds
Consumer Goods
Pri
ce
Lev
el
Real GDP
ASLR1 ASLR2
Q1 Q2
17 - 9Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
ECONOMIC GROWTH IN THEEXTENDED AD – AS MODEL
Pri
ce L
evel
Real GDP
o
P1
AS2
ASLR1
AD2
Q1
ASLR2
Q2
AD1
AS1
P2
17 - 10Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
U.S. Economic Growth,Annual Averages for Five Decades
1950-1959 1960-1969 1970-1979 1980-1989 1990-1999
U.S. ECONOMIC GROWTH RATES
5
4
3
2
1
0
Real GDP Real GDP Per Capita
Av
era
ge
An
nu
al I
nc
reas
e (
Pe
rce
nt)
17 - 11Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
ACCOUNTING FOR GROWTH
Growth AccountingLabor Inputs versus ProductivityTechnological AdvanceQuantity of Capital
InfrastructureEducation and Training
Human Capital
17 - 12Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
ACCOUNTING FOR GROWTH
Increase in Real GDP
Increase in quantity of labor
Increase in labor productivity
Accounting for Growth of U.S. Output, 1960-2008
1960 Q2to 1973 Q4
1973 Q4to 1990 Q3
1990 Q3to 2002 Q3
2002 Q3to 2008 Q4*
4.2
1.6
2.6
2.9
1.6
1.3
2.9
0.9
2.0
3.2
1.4
1.8
*Rates beyond 2002 are projections
Source: Economic Report of the President, 2003
17 - 13Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Changes in the Educational Attainment of the U.S. Adult Population
1950 1960 1970 1980 1990 2000
100
80
60
40
20
0
College Graduates or More High School Graduates or More
ACCOUNTING FOR GROWTH
Source: U.S. Census Bureau
Pe
rce
nt
of
U.S
. Po
pu
lati
on
17 - 14Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
ACCOUNTING FOR GROWTH
Economies of Scale
Improved Resource
Allocation
Other Factors
17 - 15Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
GLOBAL PERSPECTIVEAverage Test Scores, 8th. Grade, 1999
Source: Third International Math and Science Study
MathematicsRank Score
ScienceRank Score
12345678910 19
604587585582579558540534532531502
SingaporeSouth KoreaTaiwanHong Kong(China)
JapanBelgiumNetherlandsSlovak RepublicHungary Canada United States
123456789
1018
569568552550549545540539538535515
TaiwanSingaporeHungaryJapanSouth KoreaNetherlandsAustraliaCzech RepublicUnited KingdomFinlandUnited States
17 - 16Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PRODUCTIVITY ACCELERATION:A NEW ECONOMY?
Reasons for the
Productivity Acceleration•Microchip and
Information Technology•New Firms and
Increasing Returns•Start-Up Firms
17 - 17Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Sources of Increasing Returns• More Specialized Inputs• Spreading of Development
Costs• Simultaneous Consumption• Network Effects• Learning by Doing
Global Competition
PRODUCTIVITY ACCELERATION:A NEW ECONOMY?
17 - 18Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Macroeconomic Implications• More Rapid Economic
Growth• Low Natural Rate of
Unemployment• Growing Tax Revenues
Skepticism About the New
Economy
PRODUCTIVITY ACCELERATION:A NEW ECONOMY?
17 - 19Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
GLOBAL PERSPECTIVEGrowth Competitiveness Ranking 2002
Source: World Economic Forum
12345678910
United States
Finland
Taiwan
Singapore
Sweden
Switzerland
Australia
Canada
Norway
Denmark
Rank
17 - 20Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
IS GROWTH DESIRABLEAND SUSTAINABLE?
The Antigrowth View
In Defense of
Economic Growth
economic growth
supply factors
demand factor
efficiency factor
labor productivity
labor-force participation rate
growth accounting infrastructurehuman capitaleconomies of scaleNew Economyinformation technologystart-up firmsincreasing returnsnetwork effectslearning by doing
ENDBACKCopyright McGraw-Hill/Irwin, Inc. 2005
17 - 22Copyright McGraw-Hill/Irwin, 2005
Growth Economics
Production Possibilities Analysis
Supply Determinants of Real Output
Growth in the AD-AS Model
U.S. Economic Growth Rates
Accounting for Growth
Productivity Acceleration: A New Economy?
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Deficits,Surpluses
and thePublic Debt
Chapter 18 Next...
