[ 7.3 ] Economic Growth Learning Objectives Analyze how economic growth is measured. Analyze how productivity, technology, and trade relate to economic growth. Summarize the impact of population growth and government policies on economic growth. Analyze how saving and investment are related to economic growth. Explain how the functions of financial institutions affect households and businesses.

[ 7.3 ] Economic Growth Key Terms real GDP per capita capital deepening saving savings rate capital formation technological progress

Measuring Economic Growth In the early 1900s, many people cooked on wood-burning stoves. Today’s gas and electric stoves are a sign of economic growth since then.

Measuring Economic Growth Is it possible for real GDP per capita to grow if the population remains the same? Explain your answer.

Capital Deepening Analyze Charts How does capital deepening benefit workers?

Saving and Investment Analyze Charts What actually happens to the money Shawna saves?

Saving and Investment Analyze Political Cartoons What response could you make to the carved slogan on the statue about the value of saving?

The Effects of Population, Government, and Trade Population Growth Government Foreign Trade

Technological Progress Another key source of economic growth is technological progress. This term usually brings to mind new inventions or new ways of performing a task, but in economics, it has a more precise definition. Technological progress is an increase in efficiency gained by producing more output without using more inputs.

Technological Progress Measuring Technological Progress Causes of Technological Progress

Technological Progress Analyze Charts Why are companies willing to spend such large amounts of resources on training?

Quiz: Measuring Economic Growth How is high GDP per capita linked to quality of life? A. High GDP per capita makes everyone richer. B. High GDP per capita means inflation is low and the cost of goods is lower. C. High GDP per capita usually indicates better nutrition, housing, education, and job opportunities. D. High GDP per capita does not affect quality of life because money can’t buy happiness.

Quiz: Capital Deepening Why does capital deepening work with human capital? A. Capital deepening means there is more money to hire workers. B. Capital deepening increases people’s savings rate. C. Greater skill increases workers’ output. D. Human capital increases GDP.

Quiz: Saving and Investment How is saving linked to capital formation? A. Low savings means there is more money put toward capital formation. B. When money is saved, it is left in the bank and not available for capital formation. C. Saving provides money for investment in human and physical capital. D. When savings rise, the GDP drops, making capital formation more difficult.

Quiz: The Effects of Population, Government, and Trade Which answer best describes the effect of higher tax rates on investment? A. When taxes are higher, businesses become more productive, increasing investment. B. Higher tax rates reduce investment; people don’t invest when government meets all needs. C. Higher tax rates increase investment if the revenue is used to improve infrastructure. D. Higher tax rates have no impact because investment and taxation are separate decisions.

Quiz: Technological Progress What are the main factors in technological progress? A. low taxes, fewer regulations, and higher investment B. consumers buying electronic gadgets scientific research, innovation open markets, strong patent laws, and minimal regulation