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Ch. 18: Economic Growth Gr. 12 Economics M. Nicholson
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Economic Growth Increase in the total output of goods & services Real GDP adjusted for inflation whole economy’s growth capacity Real GDP per capita individual’s growth living standards
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Production Possibility Curve
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Capital vs. Consumer Goods Saws vs. Bread Saws short term pain, but long term gain Bread short & long term no pain or gain Capital economic growth in future, but less consumer goods in present Exponential growth builds on itself Rule of 72 72 % growth rate = double
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Economic Growth In Canada 1870 – 1914 $1713 - $3917 per capita GDP (Pre-World War 1) 1914 – 1945 $3917 - $7291 (Interwar Period) 1945 – 1993 $7291 - $19,084 (Postwar Period)
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Sources of Economic Growth Labour Productivity real output / hours 1. Quantity of capital 2. Technological progress 3. Quality of labour 4. Efficiency in production 5. Quality of natural resources 6. Social and political factors
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The Debate Over Growth Arguments for Economic Growth 1. Living standards 2. Social improvements 3. Psychological benefits
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The Debate Over Growth cont’d Arguments Against Economic Growth 1. Opportunity cost of growth 2. Environmental costs 3. Social costs
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Economic Development World Bank international bank for reconstruction and development High-Income Countries Per capita GNP $7911 US or more Middle Income Countries $636 - $7910 US per capita GNP Low-Income Countries $0 - $635 US per capita GNP
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Poverty and Wealth
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Points of Comparison Per capita income $1 vs. $21, 000 Health & social indicators 62 yrs vs. 77yrs Energy consumption H.I. 14 x > L.I. Asian nations (e.g. China) massive growth narrowing gap with rich Many sub-Saharan & Latin American countries further behind the rich
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The Dynamics of Development Per capita income ↑ living standards ↑ Vicious circle of poverty low per capita income low investment in capital & human resources labour-intensive production (rapid population growth) low productivity low income
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Strategies for development Political & economic stability Investing in human & capital resources need good gov’t higher savings Trade liberalization Foreign aid Population control
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