1. Long-run Economic Growth

2. Real GDP per Capita Real GDP per Capita Real GDP per Capita Not a policy goal unto itself

3. Real GDP per Capita Real GDP per Capita

4. Growth Rates Growth Rates Rule of 70 = How many years does it take for the economy to double at a given rate of economic growth = 70 ÷annual growth rate of variable

5. The Sources of Long-Run Growth Labor productivity Output per worker Explaining productivity growth Physical Capital Human Capital Technology

6. Productivity and Growth

7. Accounting for Growth: The Aggregate Production Function Aggregate Production Function Shows how output per worker depends on the quantities of physical and human capital, and technology per worker Diminishing Returns to Physical Capital Each successive increase in physical capital per worker leads to a smaller increase in productivity

8. Accounting for Growth: The Aggregate Production Function Growth Accounting Estimate the contribution of each major factor in the aggregate production function to economic growth Total Factor Productivity The amount of output that can e achieved with a given amount of factor inputs.

9. Accounting for Growth: The Aggregate Production Function

10. What About Natural Resources? What About Natural Resources? Other things equal, more natural resources leads to higher GDP per capita Other things are often NOT equal Malthus As population grows, the amount of land per worker declines; productivity falls Technology and other improvement are temporary fix

11. Success, Disappointment, and Failure East Asia’s Miracle Convergence hypothesis International differences in real GDP per capita tend to narrow over time Latin America’s Disappointment Africa’s Troubles

12. Growth Policy: Why Economic Growth Rates Differ

13. Why Growth Rates Differ Capital, Technology, and Growth Differences Adding to physical capital with investment spending Adding to human capital Education Technological Progress Research and development

14. Why Growth Rates Differ Role of Government in Promoting Economic Growth Governments and physical capital -- infrastructure Governments and human capital -- education Governments and technology – research and development Political stability, property rights and excessive intervention

15. Is World Growth Sustainable? Sustainable growth? Natural resources and growth, revisited How large are supplies of key natural resources? How effective will technology be at finding alternatives? Can long-run growth continue in the face of resource scarcity? Economic growth and the environment Air pollution Global warming

16. Economic Growth in Macroeconomic Models

17. Long-run Economic Growth and the Production Possibilities Curve K’K C’ C

18. Long-run Economic Growth and the Aggregate Demand-Aggregate Supply Model

19. Distinguishing Between Long-run Growth and Short-run Fluctuations