Let’s begin with a careful definition of exactly what we mean h~’ councilor grew the Economic growth represents the expansion of a country’s potential GDP or national output. Put differently, economic g Growth occurs when a nation’s production-possibility frontier PPF) shifts outward.

A closely related concept is the growth rate .of output per person .:This determines the rate at which the country’s living standards are rising. Countries are primarily concerned with the growth in per capital output because this leads to rising average incomes.

What are the long-term patterns of economic growth in high-income countries? Table 27-1 shows the history of economic growth since 1870 for 16 high-income countries including the major countries of North America and Western Europe, Japan, and Australia. We.see the steady growth of output over this period. Evermore important for living standards is the growth in output per hour worked, which moves closely with the increase in living standards. Over the entire period, output per worker grew by an’ average rate of 2.4 percent annually, which compounds to a growth factor of 16 over the 12().year . period.

What were the major forces behind this growth? What can nations do to speed up their economic growth rate? And what are the prospects for the twenty-first century, given the slowdown in productivity growth of the last three decades along with the possibility of tighter environmental constraints? These are the issues that must be confronted by economic-growth analysis Economic growth involves the growth of potential output over the long run. The growth in output per capital is an important objective of government because it is associated with rising average real incomes and living standards.

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