Chapter 25

Slides

VNP-Econ-Chapter 25
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25-4 Conclusion: The Importance of Long-Run Growth

In this chapter, we have discussed what determines the standard of living in a nation and how policymakers can endeavor to raise it through policies that promote economic growth. Most of this chapter is summarized in one of the Ten Principles of Economics: A country’s standard of living depends on its ability to produce goods and services. […]

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25-3i Population Growth

Economists and other social scientists have long debated how population affects a society. The most direct effect is on the size of the labor force: A large population means more workers to produce goods and services. The tremendous size of the Chinese population is one reason China is such an important player in the world […]

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25-3h Research and Development

The primary reason that living standards are higher today than they were a century ago is that technological knowledge has advanced. The telephone, the transistor, the computer, and the internal combustion engine are among the thousands of innovations that have improved the ability to produce goods and services. Most technological advances come from private research […]

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25-3g Free Trade

Some of the world’s poorest countries have tried to achieve more rapid economic growth by pursuing inward-oriented policies. These policies attempt to increase productivity and living standards within the country by avoiding interaction with the rest of the world. Domestic firms often advance the infant-industry argument, claiming they need protection from foreign competition to thrive […]

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25-3f Property Rights and Political Stability

Another way policymakers can foster economic growth is by protecting property rights and promoting political stability. This issue goes to the very heart of how market economies work. Production in market economies arises from the interactions of millions of individuals and firms. When you buy a car, for instance, you are buying the output of […]

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25-3e Health and Nutrition

The term human capital usually refers to education, but it can also be used to describe another type of investment in people: expenditures that lead to a healthier population. Other things being equal, healthier workers are more productive. The right investments in the health of the population provide one way for a nation to increase […]

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25-3b Diminishing Returns and the Catch-Up Effect

Suppose that a government pursues policies that raise the nation’s saving rate—the percentage of GDP devoted to saving rather than consumption. What happens? With the nation saving more, fewer resources are needed to make consumption goods, and more resources are available to make capital goods. As a result, the capital stock increases, leading to rising […]

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25-3a Saving and Investment

Because capital is a produced factor of production, a society can change the amount of capital it has. If today the economy produces a large quantity of new capital goods, then tomorrow it will have a larger stock of capital and be able to produce more goods and services. Thus, one way to raise future […]

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