Term
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Definition
Long-run economic growth.
The process by which rising productivity increases the average standard of living. |
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Term
| Best measure of standard of living |
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Definition
| Real GDP per person (capita) |
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Term
| Growth rate measured by... |
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Definition
Increases in real GDP per capita.
Increases in real GDP per capita = Growth Rate |
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Term
| Growth rate of real GDP per capita = |
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Definition
| percentage change from previous year |
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Term
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Definition
| 70 divided by growth rate = years it takes to DOUBLE real GDP per capita. |
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Term
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Definition
| The QUANTITY of goods and services that can be produced by ONE WORKER or by ONE HOUR OF WORK. |
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Term
| GDP per capita increases when _______ increases. |
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Definition
| As labor productivity increases, _________ increases. |
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Term
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Definition
Manufactured goods USED to produce other goods and services.
Ex: computers, warehouses, tools, etc. |
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Term
| Labor productivity increases when... |
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Definition
The quantity of CAPITAL PER HOUR WORKED and the LEVEL OF TECHNOLOGY
INCREASES |
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Term
| Hierarchy of growth; one above increases as one below increases. |
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Definition
I. GDP per capita
II. Labor productivity
III. Capital/Technology |
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Term
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Definition
| The processes a firm uses to turn inputs into outputs of goods and services. |
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Term
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Definition
| An INCREASE in the QUANTITY of OUTPUT firms can PRODUCE using a given number of INPUTS. |
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Term
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Definition
Quality based.
For instance, an increase in technology results in an increase of the amount of outputs produced from a given amount of inputs, which results in increased labor productivity which further results in possible real GDP per capita growth, hence an increasing growth rate, hence an increase in productivity and consequently, living standards. |
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Term
| Amount of physical capital available |
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Definition
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Term
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Definition
| The accumulated knowledge and skills workers acquire from education and training of from life experiences. |
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Term
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Definition
Quantity based.
For instance, an increase in capital would be an increased in the amount of goods used to produce other goods and services. |
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Term
| High rates of economic growth cannot be sustained without... |
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Definition
the accompaniment of technological change.
An increase in only capital does not ensure economic growth. Economic growth requires technological change as well. |
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Term
| How does the government play a role in economic growth? |
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Definition
The government can secure rights to private property.
The government can help the market work and aid economic growth by establishing an independent court system that enforces contracts between private individuals.
SUPPORTIVE GOVERNMENT POLICIES |
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Term
| A financial system is composed of... |
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Definition
Financial markets (stock and bond markets)
Financial intermediaries (banks) |
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Term
| How does the financial system play a role in economic growth? |
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Definition
| Without a well-functioning financial system, firms cannot expand and adopt new technologies. |
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Term
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Definition
Profit made by firms that is reinvested in the firm rather than paid to its workers.
Firms can use these earnings to help expand, buy additional equipment, train workers, and adopt new technologies. |
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Term
| Financial markets channel... |
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Definition
| funds from savers to borrowers and channels returns on the borrowed funds to savers. |
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Term
| Financial markets raise funds by |
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Definition
selling financial securities, such as stocks and bonds, directly to savers.
Funds from savers --> Borrowers
Returns from borrowers --> Savers |
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Term
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Definition
Sold in financial markets.
They are documents that state the terms under which funds pass from the buyer of the security to the seller. |
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Term
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Definition
| A financial security representing partial ownership of a firm. |
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Term
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Definition
| Financial securities that represent promised to repay a fixed amount of funds. |
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Term
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Definition
| INTERMEDIARIES between savers and borrowers. Firms include banks, mutual funds, pension funds, and insurance companies. They borrow funds from savers and lend them to borrowers. |
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Term
| Financial intermediaries raise funds by |
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Definition
| Paying savers for the use of their funds; and make profit by lending money to borrowers and charging interest rates on loans. |
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Term
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Definition
| Sells shares to savers and uses these funds to buy a portfolio of stocks, bonds, and other financial securities. |
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Term
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Definition
| Mutual fund companies which issue shares that investors may buy and sell in financial markets, like stocks of corporations. |
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Term
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Definition
| More common. Issues shares that the mutual fund companies will buy back at a price that represents the underlying value of the financial securities owned by the fund. |
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