Growth Policy: Why Economic Growth Rates Differ Lesson 38 Sections 39, 40

Why Growth Rates Differ Capital, Technology, and Growth Differences Adding to Physical Capital Investment in infrastructure Adding to Human Capital Investment in human potential (education) Technological Progress Research and Development The Role of Government in Promoting Economic Growth Government and Physical Capital Infrastructure Governments and Human Capital Governments and Technology Political Stability, Property Rights, and Excessive (?) Government Intervention

Is World Growth Sustainable? Natural Resources and Growth, Revisited Economic Growth and the Environment

Long Run Growth and the Production Possibilities Curve The Production Possibilities Curve shows us not only the opportunity cost between production of two different items, it also shows what we can achieve in terms of economic growth.

Long Run Economic Growth and the Aggregate Demand-Aggregate Supply Model Quantity of Output Y 1980 AD 1990 Aggregate Demand, 2000 Price Level Long-run aggregate supply, LRAS P 1. In the long run, technological progress shifts long-run aggregate supply . . . 4. . . . and ongoing inflation. 3. . . . leading to growth in output . . . 2. . . . and growth in the money supply shifts aggregate demand . . .

Distinguishing Between Long-Run Growth and Short-Run Functions Aggregate Price Level Real GDP LRAS SRAS1 SRAS2 AD Output above potential lowers unemployment, raising wages, which brings SRAS back into potential GDP (LRAS) Aggregate Price Level Real GDP LRAS SRAS1 SRAS2 AD Output below potential raises unemployment, lowering wages, which brings SRAS back into potential GDP (LRAS)