Economic growth (new)

8 important questions on Economic growth (new)

What is economic growth?

Sustained expansion of production possibilities measured as the increase in real GDP over a given period.

What is a growth rate and how can this be calculated?

the real GDP growth rate is the annual percentage change of real GDP.
can be calculated as: real GDP in current year - real GDP in previous year / real GDP in previous year x 100

Why does the real GDP increase?

1. the economy might be turning into full employment
2. potential GDP is increasing
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What is the calculation for the rule of 70?

70 / annual % growth rate of the variable.

What is an aggregate production function?

the relationship that tells us how real GDP changes as the quantity of labor changes when all other influences stay the same.

What is the real wage rate?

the quantity of goods and services that an hour of labor earns

What can make potential GDP grow?

- the growth of the supply of labor --> population growth --> increases the full-employment quantity of labor, increases potential GDP and lowers the real wage rate
-  growth of labor productivity.

What changes labor productivity?

- physical capital
- public capital
- human capital
- social/cultural reasons
- technology improvements

The question on the page originate from the summary of the following study material:

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