Economic Growth
Introduced| English | Meaning |
|---|---|
| Economic growth/ˌiːkəˈnɒmɪk ɡrəʊθ/ | An increase in an economy's real output of goods and services over time. |
| real GDP/rɪəl ˌdʒiː diː ˈpiː/ | The value of an economy's output adjusted for changes in prices. |
| real GDP per capita/rɪəl ˌdʒiː diː ˈpiː pɜː ˈkæpɪtə/ | Inflation-adjusted gross domestic product divided by population, used as an average indicator of real output per person. |
| Physical capital/ˈfɪzɪkl ˈkæpɪtl/ | More machines, tools, and infrastructure per worker. |
| Human capital/ˈhjuːmən ˈkæpɪtl/ | Education, skills, and health of the workforce. |
| research and development/rɪˈsɜːtʃ ænd dɪˈveləpmənt/ | Work aimed at discovering knowledge and applying it to create or improve products, processes or technologies. |
| productivity/ˌprɒdəkˈtɪvɪti/ | Output produced per unit of input over a given period. |
| institutions/ˌɪnstɪˈtjuːʃnz/ | The formal rules, informal norms and organisations that shape incentives and economic interactions. |
| property rights/ˈprɒpəti raɪts/ | Recognised rights to use, control, transfer or receive benefits from a resource or asset. |
Growth is the LRAS moving right
- Economic growth 经济增长 is a rise in an economy's potential output over time.
- On the AD-AS diagram it is the LRAS curve shifting right — the PPF pushing outward.
- It is what raises living standards decade after decade.
- We measure it as the growth rate of real GDP 实际国内生产总值.
On the AD-AS diagram, long-run economic growth appears as:
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More potential output means LRAS shifts right.
Real GDP grows 5% and the population grows 2%. Approximate per-capita growth, in percent?
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Per-capita growth ≈ 5 − 2 = 3%.
Per-capita growth is what people feel
- Total real GDP can grow just because the population grew.
- What matters for living standards is real GDP per capita 人均实际国内生产总值.
- Rule: $\text{per-capita growth} \approx \text{real GDP growth} - \text{population growth}$.
- Worked idea. Real GDP grows $5\%$, population grows $2\%$. Per-capita growth $\approx 5 - 2 = 3\%$.
Does it raise long-run growth?
Growth comes from more physical capital, human capital, and technology — all raising productivity. A one-off demand boost is not long-run growth.
Which of these raise long-run growth? (Select all that apply)
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Capital, skills, and technology grow capacity; a demand blip only shifts AD.
The education, skills, and health of the workforce are called ______ capital.
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Human capital raises how much each worker can produce.
Rising productivity means each hour of work produces less output.
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False. Productivity measures output per worker-hour, so rising productivity means more output from each hour.
The engines of growth
- Physical capital 实物资本 — more machines, tools, and infrastructure per worker.
- Human capital 人力资本 — education, skills, and health of the workforce.
- Technology and R&D — research and development 研究与开发 that finds better ways to produce.
- Together these raise productivity 生产率: more output from each worker-hour.
Secure property rights and stable institutions matter for growth because they:
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If people can keep what they build, they invest and innovate.
Why institutions matter
- Growth needs the right rules: secure property rights 产权 so people keep what they build.
- Stable institutions 制度 — courts, honest government, working markets — let investment pay off.
- Without them, capital and talent flee, and good ideas never get funded.
- This is why two countries with similar resources can grow at very different rates.
Economic growth shifts LRAS right (real GDP rises over time). Per-capita growth $\approx$ real GDP growth $-$ population growth ($5\% - 2\% = 3\%$). It comes from physical capital, human capital, and R&D raising productivity — all resting on secure property rights and stable institutions.
Write from per-person growth of 5 percent
- Real GDP grows 6 percent. Population grows 1 percent.
- Find approximate growth per person.
Real GDP grows by 6 percent and the population grows by 1 percent. What is the approximate growth in GDP per person, in percent?
6 minus 1 is 5.
What is approximate per-person growth?
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Total growth of 6 percent minus population growth of 1 percent is 5 percent per person. Other options — 3 percent (the lesson figure); 7 percent (the two growth rates added).