production possibilities curve
a major goal of short-run macroeconomic policy is to move towards what?
production possibilities curve
A short-run increase in capacity utilization: Moves the economy to a point closer to its existing what?
rightward
A long-run increase in capacity: Shifts the production possibilities curve which way?
economic growth
Changes in potential GDP (increase in output); Comes from an Increased use of our productive capabilities
outward
Long Run Macroeconomic growth Shifts the production possibilities curve which way?
a technological advance
Long-run economic growth can occur as the result of what?
rightward
Long-run economic growth can be achieved in the long-run aggregate supply curve with a ___ shift.
real GDP
The value of final output produced in a given period, adjusted for changing prices; refers to the actual quantity of goods and services produced
growth rate
Percentage change in real output from one period to another
real GDP rises
An economy experiences economic growth whenever what happens?
cumulative
the process of economic growth; gains made in one year are accumulate in future years.
exponential process
cumulative process, whereby interest or growth is compounded from one year to the next
GDP per capita
Total GDP divided by total population; average GDP; often used as a basic measure of our standard of living; Growth is attained only when the growth of output exceeds population growth.
net growth
the GDP growth rate minus the population growth rate
GDP per worker
measures productivity
increased
productivity in the US in recent decades has what?
improvements in output per worker
Depend in large part on increases in the quantity of capital equipment and the quality of capital equipment
productivity
Output per unit of input, for example, output per labor-hour
total output/total employment
enhancing labor productivity
Additional capital makes its best contribution to economic growth by doing what?
Growth rate of total output
growth rate of labor force + growth rate of productivity
sources of productivity gains
� Higher skills�an increase in labor skills.
� More capital�an increase in the ratio of capital to labor.
� Technological advance�the development and use of better capital equipment and products.
� Improved management�better use of available resources in
lack of savings
could impede productivity improvements
the rate of capital investment
a primary determinant of labor productivity is what?
savings
aren't just a form of leakage but a basic source of investment financing
net investment
Gross investment less depreciation
depreciation
a decrease in price or value
R&D (research and development)
� has made the greatest contribution to economic growth over time
� includes scientific research, product development, innovations in production techniques, and the development of management improvements.
new growth theory
emphasizes the importance of investing in ideas.
development of human capital
a policy lever that definitely enhances productivity