AP Economics Mr. Bernstein Module 37: Long Run Economic Growth March 30, 2015

AP Economics Mr. Bernstein Long Run Economic Growth Objectives - Understand each of the following: How we measure long-run economic growth How real GDP has changed over time How real GDP varies across countries The sources of long-run economic growth How productivity is driven by physical capital, human capital, and technological progress 2

AP Economics Mr. Bernstein Real GDP Per Capita Real to separate changes in total goods and services from effects of changes in price levels Per Capita to isolate effects of changes in population Usually not policy goal Related to standards of living 3

AP Economics Mr. Bernstein Real GDP Per Capita 4

AP Economics Mr. Bernstein Growth Rates Growth rates compound Rule of 70: 70/growth rate = number of years for GDP to double 5

AP Economics Mr. Bernstein Why do some economies grow faster than others? Productivity, productivity, productivity Real GDP Per Capita only grows when the average output per worker grows How can worker productivity increase? Physical Capital – ie better tools or software Human Capital – ie better training or educations Technology – ie application of knowledge 6