5.6 Economic Growth

Grow Grow Grow!

GDP per capita

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Review

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Aggregate Production Function

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• Advancement of technology could speed up production and influence productivity.
• For example, advances in agricultural technology could make farming more efficient and enable farmers grow more food. This would increase productivity and lead to economic growth.
• Even the invention of the wheel, Internet, and phones have changed the economy forever. Have you ever heard of the cotton gin? Invented by Eli Whitney, it increased the productivity of cotton exponentially. As a result, cotton became a very lucrative crop. Problem was, because many people went into the cotton industry, the demand for slaves soared in the South. Long story short, the invention of the cotton gin basically set the economic stage for the Civil War! A short tie to APUSH 😊
• Anywho, because technology is important, the government has created policies to fund research and provide incentives to invent new things. The government also funds professors and labs throughout our country in order to advance technology.

• Physical capital includes tangible, man-made objects that a company buys and uses to produce goods. The machinery, buildings, vehicles, and computers that a company owns are all considered part of its physical capital.
• For example, if a company invests in a new warehouse, then they can hire more workers, who will produce more goods. Thus, an increase in physical capital will lead to an increase in productivity.
• Supply-side policies are related to this because increased investment is also a type of increase in physical capital. More to come about supply-side stuff in the next section!

• Human capital includes resources that people can provide such as education, experience, or unique skills. If the workers are more skilled and have obtained higher education then productivity will increase.

• If a hotel workers knew how to speak different languages in order to help its guests, that would be a plus right?
• If an accountant earned a stockbroker's license, that would increase the accountant's productivity.
• If the hospital is vaccinated against a disease, they'll be more productive even during disease outbreaks.
• Because human capital is super valuable in productivity, many nations create policies to increase human capital. These include more subsidies for public education, lower prices of interest of student loans and promote research through governmental agencies.
• Remember, even you studying this right now is increasing human capital because it might help sometime in your life and increase your productivity. So keep up the good work and you got this!! 🦾

• Natural resources are crucial to success in an economy. If a nation lacks minerals, fertile soil, timber or is landlocked, the economy will struggle to grow. Though some countries have found other ways to grow, natural resources are definitely great if you have them.
• An example is Canada. Canada is blessed with a bunch of natural resources, so even with a smaller population than the US, it has been able to grow its economy pretty quickly.
• Nonrenewable resources, as you probably know, are resources that cannot be replenished. Meaning, once you use them, they're gone and we'll only keep running out of them. Examples include oil and coal.
• Renewable resources, on the other hand, are resources that can be replenished. These include things like timer and salmon.
• Environmental policies strive to protect these natural resources, but it can decrease productivity a little since these resources are used through regulations (used at smaller amounts) in the short run.
• However, in the long run, environmental policies increase productivity 😉

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