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  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 7 of 23 … The productivity determinants are: -1- physical capital -2- human capital -3- natural resources -4- technological knowledge … -3- Natural resources Natural resources are production inputs provided by nature, including land, rivers, and mineral deposits. There are two forms of natural resources: renewable and nonrenewable. A forest is a renewable resource. When a tree is cut down a seedling can be planted to replace it for future harvest. Oil is a nonrenewable resource. Oil is produced by nature over many millions of years, once the supply of oil is depleted, we cannot create more. … Differences in natural resources result in some of the standards of living differences among countries. The economic success of the United States is partly a result of the large supply of land for agriculture. Some Middle East count...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 6 of 23 … How is productivity determined? For Robinson Crusoe, fishing productivity factors include: -1- his amount and quality of fishing poles -2- any previous training in or experience with fishing techniques -3 - the size of the island’s fish supply -4- his ability to develop better fishing tools Each of these four are productivity determinants, and have counterparts in large economies. These determinants are called: -1- physical capital -2- human capital -3 - natural resources -4- technological advancement … -1- Physical Capital Workers are more productive if they have greater quantity and quality tools. The stock of equipment and structures used for production is called physical capital, or simply capital. For carpenters, the capital they use includes saws, lathes, and drill presses. More and better tools allow car...

  What If All of Us Were Union Members? … Most economists agree the demand for labor is elastic, meaning an almost horizontal labor demand curve for labor. Demand for labor is sensitive to wage level, e.g. if wage level goes up 10% the number workers demanded goes down more than 10%. Per Figure 1 model, with full unionization of an industry with resulting wage level of B employment in the industry would substantially decrease, from D to C. The former union workers and potential ones find work in non-union industries where employers pay lower market value wages. For the unionized workers who keep their jobs wages would go up to B. Total employment and total wages paid in the industry would both decrease because of elastic demand for labor. The industry's total wages paid before unionization is the larger area 0-A-E-D. The economy's total wages paid after unionization is the smaller area 0-B-F-C. Area 0BFC is about 44% the size of area 0AED The price level in the overall economy ...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 5 of 23 … Explaining the large variation in living standards around the world is easy and can be summarized in one word: productivity — unit of output per unit of input. We can develop an example of productivity based on the novel Robinson Crusoe, about a sailor marooned on a desert island. Crusoe catches his own fish, grows his own vegetables and makes his own clothes. By examining Crusoe's simple economy, we learn lessons that apply to realistic, complex economies. … Productivity determines Crusoe's standard of living. Productivity is the quantity of goods produced from each unit of labor input. In Crusoe’s case the unit is simply the amount of time needed to produce something. If Crusoe is quick at catching fish, growing vegetables, and making clothes, his standard of living is high. If he is slow at these, he liv...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 4 of 23 … The all-time richest American was John D. Rockefeller, the oil entrepreneur who lived from 1839 to 1937. Calculations show his wealth today would be equivalent of $200 billion, more than twice Warren Buffett, who is today's (in 2006) richest American. But Rockefeller did not enjoy many of the conveniences we now take for granted. He couldn't watch TV, use a cell phone, surf the Internet, or send e-mail. During the summer heat, he didn’t have air conditioning to cool his home. For much of his life he didn’t have electricity and couldn't travel by car or plane. If he became ill, there weren’t medicines such as antibiotics doctors today commonly use to enhance and prolong life. How much money would you have to be paid to for the rest of your life do without all the modern conveniences unavailable to Rockef...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 3 of 23 … Table 1 shows real GDP per person data for thirteen countries. Beginning year varies because of data availability. United States year 2006 income per person $44,260 is · about six times China’s $7740 · about twelve times India’s $3800 The poorest countries in 2006 have income levels the rich countries had many decades ago. The typical person in India in 2006 had less real income ($3800) than the typical resident of England in 1870 ($4502). The typical person in Bangladesh in 2006 had about two-thirds the real income ($2340) of a typical American a hundred years ago ($3752). … The Table 1 last column shows each country's growth rate over the time period. In the United States · real GDP per person was $3,752 in 1870 · real GDP per person $44,260 in 2006 · the growth rate was 1.83 percent per year Japan is atop...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 2 of 23 … The average income in a rich country including the United States, Japan, and Germany is more than ten times the average income in a poor country including India, Indonesia, Nigeria. People in richer countries have better nutrition, housing, sanitation, healthcare, longer life expectancy, and more automobiles, telephones, televisions. Over time, within a country there can be large standard of living changes . … Over the past century in the United States average income, as measured by real GDP per person, has grown yearly by about two percent. Although two percent might seem small, per the “rule of 72” where you divide 72 by the rate of growth a two percent growth rate means average income doubles about every 35 years. This has resulted in average income today in the U.S. of about eight times that of a century a...

  Profits Are Good, The More The Better, They Create Wealth, Jobs and Economy Growth … How do profits create wealth and economy growth? Inputs, including labor and raw materials, into Company A cost $100. Product created from those inputs sells for $110. Adding up all businesses, the economy had e.g. $100,000 of wealth before but it now has $110,000. … Per Figure 1, potential competitors see the Q1 sales quantity and P1 prices and can estimate profits of Company A. They are incentivized to start up competing companies or start making the same product at their existing company. Competition among multiple suppliers results in · increased product supply, moving from Q1 to Q2 . increased employment because of the increase of quantity produced · reduction of product price, from P1 to P2 Product quality and variety also increase due to competition. … In a market economy any person or group is free to start a new competing company, but they must: · have required skill/knowledge · have or ...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 1 of 23 … Chapter 25 - Production and Growth - Topics Economic Growth Around The World Are You Richer Than The Richest American? Productivity: Its Role and Determinants Why Productivity Is So Important How Productivity Is Determined The Production Function Measuring Capital Are Natural Resources A Limit To Growth? Economic Growth and Public Policy Diminishing Returns and The Catch-Up Effect Investment From Abroad Promoting Human Capital Health and Nutrition Property Rights and Political Stability Free Trade Research And Development Population Growth Escape From Malthus The Importance of Long-Run Economic Growth … … the importance of long-run economic growth chouki keizai seichou no juuyoosei … … Grok chapter 25 summary: Chapter 25 examines the long-run factors behind economic prosperity and differences in living standard...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 8 The Data of Macroeconomics Chapter 24 of 36 Measuring The Cost of Living Section 14 of 14 … Chapter conclusion. During recent history the dollar real value has not been stable. Increases in the level of prices has been the norm. Persistent inflation reduces money purchasing power over time. When comparing dollar figures from different times, we always must keep in mind a dollar value today is not the same as a dollar value 10 years ago and will not be the same as a dollar value 10 years from now. … In this chapter we have seen how economists measure the economy’s overall price level using price indexes such as the consumer price index. Price indexes allow us to compare dollar figures of different time points get a better understanding of how the economy is changing. Understanding price indexes, nominal and real prices, and GDP are first steps in macroeconomics study. These price and GDP measurement co...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 8 The Data of Macroeconomics Chapter 24 of 36 Measuring The Cost of Living Section 13 of 14 … Figure 3 - Real and Nominal Interest Rates This figure shows nominal and real interest rates using annual data since 1965. The nominal interest rate is the rate on a 3-month Treasury bill. The real interest rate is the nominal interest rate minus the inflation rate as measured by the consumer price index. Notice nominal and real interest rates often do not move together. … The real interest rate is computed by subtracting the rate of inflation from the nominal interest rate. Figure 3 illustrates the fact during normal economic times, when the nominal interest rate is above the inflation rate, the real interest rate is above zero. Figure 3 also shows because inflation is variable real and nominal interest rates do not always move together. In the late 1970s nominal interest rates were high and rising. But be...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 8 The Data of Macroeconomics Chapter 24 of 36 Measuring The Cost of Living Section 12 of 14 … A year ago Sally Saver made a $1000 deposit in a bank savings account paying 10% interest per year. At that time a CD at the local music store cost $10. Her $1,000 was equivalent to the value of 100 music CDs. Now, a year later, with interest she has $1,100. How many CDs she now can buy depends on the current CD price. … Here are some examples of what could have happened to the CD price over the past year: Zero inflation · the price of a CD remains at $10 · the number of CDs she can buy with her $1100 has risen from 100 to 110 · she has had a 10% increase in purchasing power Six percent inflation · the price of a CD has risen from $10 to $10.60 · the number of CDs she can buy with her $1100 has risen from 100 to about 104 · she has had a 4% increase in purchasing power Ten percent inflation · the price of a CD ...

  Long-Run Effects of Raising and Lowering Overall Tax Rate Do we want both: all individuals to be much richer and government to receive much more tax revenue? Then we must substantially lower tax rates. … Table 1 model compares GDP and tax revenues change over 200 years when: -overall tax rate, taxes/GDP, is raised from 30% to 40% - Democrats-preferred -overall tax rate, taxes/GDP, is lowered from 30% to 20% - Republicans-preferred … At year 200 Republicans-preferred 20% overall tax rate compared to Democrats-preferred 40% overall tax rate has resulted in: GDP 49 times larger Yearly tax revenue 24 times larger Total all years tax revenue 13 times larger … Tax revenue surpluses to be mainly used for: Citizens’ Shareholder Dividend, making everyone a millionaire from birth. Development of technologies to enable the spread of tHAT through the universe. … All of tHAT is logical, intuitive, and common sense, but we must always keep in mind: -people are mainly concerned about the curren...