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© 2013 Pearson
25.1 THE BASICS OF ECONOMIC GROWTH
© 2013 Pearson
25.1 THE BASICS OF ECONOMIC GROWTH
© 2013 Pearson
25.1 THE BASICS OF ECONOMIC GROWTH
© 2013 Pearson
25.1 THE BASICS OF ECONOMIC GROWTH
© 2013 Pearson
25.1 THE BASICS OF ECONOMIC GROWTH
© 2013 Pearson
25.1 THE BASICS OF ECONOMIC GROWTH
Growth of real
= Growth rate of – Growth rate of
GDP per person real GDP population
© 2013 Pearson
25.1 THE BASICS OF ECONOMIC GROWTH
Growth of real
GDP per person = 5 percent – 1 percent = 4 percent.
© 2013 Pearson
25.1 THE BASICS OF ECONOMIC GROWTH
© 2013 Pearson
25.1 THE BASICS OF ECONOMIC GROWTH
© 2013 Pearson
25.2 LABOR PRODUCTIVITY GROWTH
Labor Productivity
Labor productivity is the quantity of real GDP
produced by one hour of labor.
It is calculated by using the formula:
Real GDP
Labor productivity =
Aggregate hours
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25.2 LABOR PRODUCTIVITY GROWTH
$8,000 billion
Labor productivity = = $40 per hour
200 billion
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25.2 LABOR PRODUCTIVITY GROWTH
© 2013 Pearson
25.2 LABOR PRODUCTIVITY GROWTH
© 2013 Pearson
25.2 LABOR PRODUCTIVITY GROWTH
© 2013 Pearson
25.2 LABOR PRODUCTIVITY GROWTH
© 2013 Pearson
25.2 LABOR PRODUCTIVITY GROWTH
© 2013 Pearson
25.2 LABOR PRODUCTIVITY GROWTH
© 2013 Pearson
25.2 LABOR PRODUCTIVITY GROWTH
© 2013 Pearson
25.2 LABOR PRODUCTIVITY GROWTH
Real GDP grows because labor becomes more productive
and because the quantity of labor increases.
Figure 25.4 summarizes the sources of real GDP growth.
Real GDP growth depends on quantity of labor growth
and on labor productivity growth.
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25.2 LABOR PRODUCTIVITY GROWTH
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25.2 LABOR PRODUCTIVITY GROWTH
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25.3 ECONOMIC GROWTH THEORIES: OLD AND NEW
© 2013 Pearson
25.3 ECONOMIC GROWTH THEORIES: OLD AND NEW
© 2013 Pearson
25.3 ECONOMIC GROWTH THEORIES: OLD AND NEW
© 2013 Pearson
25.3 ECONOMIC GROWTH THEORIES: OLD AND NEW
© 2013 Pearson
25.3 ECONOMIC GROWTH THEORIES: OLD AND NEW
© 2013 Pearson
25.3 ECONOMIC GROWTH THEORIES: OLD AND NEW
5. The birth of
new firms and
the death of
some old firms,
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25.3 ECONOMIC GROWTH THEORIES: OLD AND NEW
7. More leisure
and more
consumption
goods and
services.
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25.3 ECONOMIC GROWTH THEORIES: OLD AND NEW
8. A higher
standard of
living.
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25.4 ACHIEVING FASTER GROWTH
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25.4 ACHIEVING FASTER GROWTH
© 2013 Pearson
25.4 ACHIEVING FASTER GROWTH
© 2013 Pearson
25.4 ACHIEVING FASTER GROWTH
© 2013 Pearson
25.4 ACHIEVING FASTER GROWTH
© 2013 Pearson
25.4 ACHIEVING FASTER GROWTH
© 2013 Pearson
25.4 ACHIEVING FASTER GROWTH
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25.4 ACHIEVING FASTER GROWTH
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Why Are Some Nations Rich and Others Poor?
The United States started to grow rapidly 150 years ago and
overtook Europe in the early 20th century.
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Why Are Some Nations Rich and Others Poor?
In a transition from
Communism to a
market economy,
Central Europe is now
growing faster.
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Why Are Some Nations Rich and Others Poor?
Economic growth in
Central and South
America and Africa has
been persistently slow.
© 2013 Pearson
Why Are Some Nations Rich and Others Poor?
© 2013 Pearson
Why Are Some Nations Rich and Others Poor?
© 2013 Pearson
Why Are Some Nations Rich and Others Poor?
© 2013 Pearson