Economic Growth: Lecture 8 Overview
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Questions and Answers

What is a characteristic of sustained growth?

  • It is largely due to technological spillovers from developed countries.
  • It results primarily from foreign investment.
  • It relies on technological innovation and human capital development. (correct)
  • It occurs rapidly through external resources.

Which of the following is NOT a factor contributing to catch-up growth?

  • Influx of foreign investment
  • Advancements in local technology (correct)
  • Utilization of local underutilized human capital
  • Improvement of labor efficiency

What is a primary source of catch-up growth?

  • The diversification of local industries.
  • Technological spillovers from more developed countries. (correct)
  • Continuous improvement in local education systems.
  • Stable government policies promoting local businesses.

Which of the following statements about sustained growth is true?

<p>It can support continuous improvement over time. (D)</p> Signup and view all the answers

Which option does NOT directly support the concept of catch-up growth?

<p>Reduction of local labor costs. (D)</p> Signup and view all the answers

What does economic growth specifically refer to?

<p>Increase in a country’s GDP over time (B)</p> Signup and view all the answers

How is the growth rate of GDP calculated?

<p>Percentage change in GDP from one period to another (B)</p> Signup and view all the answers

What trend has been observed regarding GDP around the world over the last 200 years?

<p>Short-run fluctuations with a long-term increase (B)</p> Signup and view all the answers

Which of the following is NOT a method of measuring GDP?

<p>Consumer index approach (B)</p> Signup and view all the answers

Which of the following statements concerning Real vs. Nominal GDP is true?

<p>Real GDP is adjusted for inflation while nominal GDP is not. (D)</p> Signup and view all the answers

What is one of the key flaws of GDP as a measure of economic health?

<p>It does not account for income distribution. (A)</p> Signup and view all the answers

GDP per capita PPP is important for assessing what aspect of national economies?

<p>Global inequality and living standards (D)</p> Signup and view all the answers

Which of the following is true regarding the relationship between GDP growth and productivity?

<p>Increased productivity typically leads to GDP growth. (B)</p> Signup and view all the answers

What is generally regarded as the primary indicator of economic performance?

<p>Gross Domestic Product (GDP) (D)</p> Signup and view all the answers

What characterizes the economic growth before the 1800s?

<p>Output growth was minuscule despite periods of prosperity. (B)</p> Signup and view all the answers

According to Malthus's theory, what happens when GDP per capita exceeds the subsistence level?

<p>Fertility adjusts to reinstate subsistence levels. (A)</p> Signup and view all the answers

What was one of the reasons for the lack of sustained growth before the 1800s?

<p>New wealth was often utilized in unproductive ways. (D)</p> Signup and view all the answers

Which statement reflects the consequences of falling GDP per capita according to Malthus?

<p>It can trigger famine, child mortality, or conflict. (C)</p> Signup and view all the answers

What did ancient economies like Babylon and Persia experience in terms of prosperity?

<p>Periods of prosperity with limited growth in output. (A)</p> Signup and view all the answers

How did population dynamics contribute to economic stagnation before the 1800s?

<p>Child labor was essential for many families. (D)</p> Signup and view all the answers

Which factor was NOT a reason for slow economic growth prior to the 1800s?

<p>Widespread sharing of wealth among the populace. (A)</p> Signup and view all the answers

What limitation did economies face in achieving sustainable growth before the modern era?

<p>The slow pace of technological change. (D)</p> Signup and view all the answers

What is the relationship between constant GDP growth rates and the overall GDP increase?

<p>GDP growth rates compound over time. (A)</p> Signup and view all the answers

How many years would it take for GDP to double at a growth rate of 5%?

<p>25 years (C)</p> Signup and view all the answers

Which country had the highest average annual GDP growth rate between 1960 and 2010 according to the data?

<p>Greece (B)</p> Signup and view all the answers

What happens to GDP if it starts at 100 and grows at a rate of 3% for 40 years?

<p>It becomes 316. (A)</p> Signup and view all the answers

Given a starting GDP of 100, what will the GDP be after 40 years at a growth rate of 2%?

<p>Approximately 216 (A)</p> Signup and view all the answers

Which of the following statements about GDP growth rates is accurate?

<p>Slim differences in rates can lead to large GDP gaps over time. (D)</p> Signup and view all the answers

What is the average GDP per capita of the United States in 2010 as per the provided data?

<p>$41,365 (D)</p> Signup and view all the answers

At what growth rate would GDP triple in 24 years?

<p>5% (D)</p> Signup and view all the answers

Which of the following countries had an average GDP per capita of approximately $55,862 in 2010?

<p>Singapore (B)</p> Signup and view all the answers

Which of the following scenarios demonstrates the impact of compounding in GDP growth?

<p>A small annual growth rate leads to a significantly higher GDP over decades. (C)</p> Signup and view all the answers

What trend is observed when GDP growth rates slightly differ over an extended period?

<p>Even slight differences create considerable gaps in GDP. (B)</p> Signup and view all the answers

How does a 10% annual growth rate affect the time taken for GDP to double?

<p>It doubles in approximately 8 years. (A)</p> Signup and view all the answers

What was the average GDP per capita of the UK in 2010?

<p>$34,268 (B)</p> Signup and view all the answers

What is the primary focus of leaders regarding poverty in the context of population growth?

<p>They sought to decrease the population. (D)</p> Signup and view all the answers

Which major historical event began in Britain and is linked to the advancement of technology in production?

<p>The Industrial Revolution (B)</p> Signup and view all the answers

Before 1800, the majority of labor was primarily involved in which of the following?

<p>Production of necessities (D)</p> Signup and view all the answers

What transformation did the Industrial Revolution cause in terms of family and labor dynamics?

<p>The concept of large families was replaced by the idea of small families. (D)</p> Signup and view all the answers

What is the significance of investing in research and development today for future wealth?

<p>It will determine the wealthy countries of the future. (A)</p> Signup and view all the answers

How did technology's role in production change after 1800?

<p>It freed labor from necessity production to more productive sectors. (C)</p> Signup and view all the answers

The Malthusian model was a good representation of population trends until which period?

<p>The Industrial Revolution (C)</p> Signup and view all the answers

In the context of the Malthusian cycle, what effect would lifting people out of poverty have had?

<p>Decreased population and increased GDP per capita to subsistence. (A)</p> Signup and view all the answers

What main advantage did technology provide to humanity regarding economic cycles?

<p>Breaking away from the Malthusian cycle (C)</p> Signup and view all the answers

Which factor is NOT mentioned as affecting the prosperity of nations?

<p>Political policies (A)</p> Signup and view all the answers

Which of the following factors is considered to be out of a nation's control?

<p>Geography (A)</p> Signup and view all the answers

According to the content, which aspect contributes to a nation's prosperity but is entirely based on chance?

<p>Luck (D)</p> Signup and view all the answers

What should students be cautious about when using lecture slides for studying?

<p>Slides may mislead if used without lecture notes (B)</p> Signup and view all the answers

Which of the following is NOT a characteristic of the factors affecting national prosperity?

<p>They are all controllable (A)</p> Signup and view all the answers

What initiative is mentioned in relation to attempting to alleviate poverty in Africa?

<p>End Poverty in Africa initiatives (A)</p> Signup and view all the answers

Which of the following best describes the role of historical factors in a nation's prosperity?

<p>They shape the context for current economic conditions (B)</p> Signup and view all the answers

Flashcards

Sustained growth

Economic growth originating from a country's own advancements in technology and human capital.

Catch-up growth

Economic growth resulting from technology adoption and investments from more developed countries.

Technological innovation

The development of new technologies or methods to improve efficiency and productivity.

Human capital

The skills, knowledge, and experience of a nation's workforce.

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GDP Growth

The rate at which a country's Gross Domestic Product (GDP) changes over time.

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Catch-up growth

The ability of some economies to grow faster than others by adopting technologies and knowledge of more advanced economies.

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Pre-1800s economies

Economies before the 1800s that did not experience significant and sustained growth.

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Malthusian limits to growth

A theory that suggests population growth will eventually outpace resources, limiting growth in living standards.

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Thomas Malthus

An economist who proposed the Malthusian theory of population and growth.

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Subsistence level

The minimum level of income needed for basic survival.

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Technological change (pre-1800s)

Technological advancements before the 1800s were much slower than today, impacting economic growth.

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Wealth concentration (pre-1800s)

Wealth in pre-1800s economies often concentrated in the hands of a few, not used for productive purposes.

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Lack of sustained growth causes

The lack of sustained growth in pre-1800s economies was attributed to slow technological change, concentration of wealth, and unproductive use of wealth.

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Exponential Growth

Growth where the increase builds upon past growth, leading to a compounding effect.

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GDP Growth Rate

The percentage change in a country's Gross Domestic Product (GDP) over a period.

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Compounding Effect

The effect of accumulating growth on previously accumulated growth over time.

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GDP Doubling Time

The time it takes for a GDP to increase by a factor of 2.

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GDP Doubling Time (1% Growth)

GDP doubles approximately every 71 years with 1% annual growth.

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GDP Doubling Time (3% Growth)

GDP doubles approximately every 25 years with 3% annual growth.

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GDP Doubling Time (5% Growth)

GDP doubles approximately every 15 years with 5% annual growth.

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GDP Doubling Time (10% Growth)

GDP doubles approximately every 8 years with 10% annual growth.

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GDP Tripling Time

The time it takes for a GDP to increase by a factor of 3.

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Large GDP Gaps

Significant differences in the size of a country's GDP resulting from dissimilar growth rates.

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GDP per capita (PPP)

the GDP of a country adjusted for purchasing power parity, divided by its population.

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Annual GDP Growth

The average yearly increase in a country's GDP, usually expressed as a percentage.

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Gross Domestic Product (GDP)

The total value of all final goods and services produced within a country's borders in a specific time period.

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Growth Differences

Variances in the rates at which different economies grow.

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Long-term GDP Trend

The overall direction and pattern of changes in a country's GDP over an extended period of time.

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Purchasing Power Parity (PPP)

A method for comparing economic output across countries based on the relative cost of goods and services.

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Malthusian Cycle

A historical pattern where population growth outpaces resource production, leading to famine and conflict, thus reducing population.

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Technology & Prosperity

Technological advancements allow a population to escape cycles of scarcity by raising output.

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Factors of National Prosperity

Factors influencing national wealth, including climate, geography, culture, institutions, history, and luck.

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Climate & Ecology

Environmental factors that play a role in national prosperity.

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Geography

The impact of a country's location and resources on its economic development.

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Culture

The beliefs, values, and traditions influencing a nation's economic success.

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Institutions

The rules, laws, and government frameworks that shape resource allocation and economic activity.

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History's Impact

Past events and circumstances affecting a nation's current state.

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Malthusian Model

A model explaining population growth and resource availability. Historically, it predicted population growth would eventually outpace resources, leading to poverty and famine.

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Industrial Revolution

A period of major technological advancements, starting in the 1760s, which dramatically boosted economic growth by freeing up labor from essential necessities production.

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Demographic Transition

The shift from rural, agricultural-based societies to urban, industrial ones, often driven by technological advancements and economic changes.

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Child Labor Shift

Historical shift in the value of children from assets to liabilities as families sought prosperity through other means and technology.

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Smart Family Model

A model of family structure focused on investments in education and human capital over large immediate family sizes.

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R&D Investment

Investing in research and development is crucial for future economic growth and advances in technology and productivity.

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Population vs GDP

Historical leadership did not focus on improving people's living standards through poverty reduction but focused on reducing the population size, which could potentially increase GDP per capita.

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Malthusian Cycle (non-human)

The Malthusian model still applies to non-human populations like locust swarms, where rapid population growth can deplete resources before there's time to develop solutions.

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Macroeconomics

The study of the economy as a whole, including topics like inflation, unemployment, and economic growth.

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GDP

Gross Domestic Product; the total value of all final goods and services produced within a country in a given period.

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GDP Growth Rate

The percentage change in GDP from one period to another.

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Real vs. Nominal GDP

Real GDP adjusts for inflation, while nominal GDP does not. Thus, real GDP is a better measure of economic growth.

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Economic Growth

The increase in a country’s GDP over time, usually measured in percentage terms.

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CPI

Consumer Price Index; a measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.

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PPP

Purchasing Power Parity; a method of comparing the relative value of currencies of different countries.

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GDP Flaws

GDP doesn't perfectly measure well-being, account for externalities, environmental damage or income distribution.

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Global Inequality

The uneven distribution of wealth and income across the countries of the world.

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National Productivity

The efficiency with which a country's workforce produces goods and services.

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Study Notes

Lecture 8: Economic Growth

  • Macroeconomics definition, measuring GDP (production, expenditure, income)
  • Distinction between real and nominal GDP, using CPI and PPP
  • GDP flaws, global inequality, and national productivity
  • Economic growth defined as increase in a country's GDP over time
  • Growth rate is the percentage change in GDP from one period to another
  • Historically, GDP has generally increased over the last 2 centuries, though short-term fluctuations exist
  • Long-term trend of GDP noted
  • GDP growth is exponential, not linear
  • Growth rates, when compounded, lead to exponential increases over time
  • Small differences in growth rates result in sizable GDP differences after a period
  • Examples of Sustained vs. Catch-up growth detailed

Sustained vs. Catch-up Growth

  • Sustained growth arises from a country's internal advancements (technological innovation, human capital development)
  • Catch-up growth comes from technology spillovers and advantages from other developed countries; benefits from local underutilized human capital, foreign investment, infrastructure improvements, and more efficient labor.

Malthusian Limits to Growth

  • Thomas Malthus' theory noted that population growth would limit per capita income
  • Malthus observed that fertility would adjust so that income would revert back to subsistence levels
  • When GDP per capita exceeds subsistence, population growth increases, bringing it back down to subsistence
  • When GDP per capita falls below subsistence, factors such as famine, child mortality, or war reduce the population

The Industrial Revolution

  • The Industrial Revolution's impact on economic growth; the shift in production from necessities to more productive sectors.
  • Technological development allowed for fewer people to work on producing necessities, accelerating productivity due to opportunities in other areas.
  • Modern families reduced reliance on children for labor, leading to a profound economic shift.
  • The Industrial Revolution marked a significant break from earlier, slower growth patterns.

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Lecture 8: Economic Growth PDF

Description

This quiz covers key concepts from Lecture 8 on economic growth in macroeconomics. Examine definitions of GDP, the distinction between real and nominal GDP, and understand the factors influencing sustained versus catch-up growth. Analyze historical trends and their implications for productivity and global inequality.

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