Chapter 9 Flashcards
How to meaasure LREG?
GDP per capita
formula
GDP per capita
GDP per capita = real GDP/Population
2 reasons
Why GDP per capita?
- Eliminates population change
- Able to see the average standar of living
formula
Growth rate of real GDP per capita
%Δ real GDP per capita = %Δ real GDP - %Δ population
Rule of 70
What it is and formula
Rule of 70 = #of years for x to double = 70/Annual Growth rate in %
Most important soruce of LREG
Productivity
Productivity
Definition / formula
Productivity = output per worker or per hour
Productivity = Real GDP / # of workers
3 Things that increases productivity:
- increase in physical capital
- Human made resources
- Ex) buildings, machines - increase in human capital
- improvement in labour created by education - Technological process
- Advance in the technical means of the production of g/s
- Most central drives of productivity growth
Definition and formula
Aggregate Production Function
also explain all the variables
Relationship that shows how the aggregate real quantity of output is produced using the available factors of production.
Y = A x F(K,L,H)
Y = Real GDP
A = Technology
K = Physical capital used
H = Human capital used
L = Labour hours
Per worker production function
(Y/L) = A x F[(K/L), (H/L)
Diminishing Marginal Returns
An increase in one output while keeping other inputs fixed will ause the increase in output to get smaller and smaller
하나만 올리는 건 의미가 없고 모든 factor 다 올려야지 meaningful한 growth를 보여줌
Growth Accounting
Estimates contribution of each of the major factors (KLHA) in production function
Cobb - Douglas production function
Y = K^(1/3) x L^(1/3) x H^(1/3) x A
Growth accounting function
%ΔA + (1/3)%Δ(K/L) + (2/3)%Δ(H/L)
