* Economic growth is defined as either an increase in real GDP or in real GDP per capita over a period of time. * Real GDP per capita = real GDP / population
* To find the approximate number of years required to double Real GDP, we use the rule of 70:
Approximate number of years required to double real GDP = 70 / annual percentage rate of growth (look at P.611 top of the page for a clear example about this calculation) * The institutional structures that promote economic growth are: 1. Strong property rights
2. Patents and copyrights
3. Efficient financial institutions
4. Literacy and widespread education
5. Free trade
6. A competitive market system
(To understand these “structures” more, and to know how each one helps in economic growth, you can read the column on the right-hand side on page 615 and the column on the left hand side on page 616). * The factors that directly affect the rate of economic growth are called the DETERMINANTS of ECONOMIC GROWTH. These Determinants can be grouped into 4 supply factors, 1 demand factor and 1 efficiency factor. I. SUPPLY FACTORS:
1) Increases in the quantity and quality of natural resources 2) Increases in the quantity and quality of human resources 3) Increases in the supply (or stock) of capital goods.
4) Improvements in technology
These supply factors (i.e the changes in physical and technical agents of production) enable and economy to expand its GDP. II. Demand Factor:
To achieve the production potential created by the supply factors, households, businesses and government must purchase the economy’s expanding output of goods and services. When that occurs, there will be no unplanned increases in business inventories and the resources of the economy will remain fully employed.
III. Efficiency factor:...