changes in potential gdp

WELCOME TO OUR

PRESENTATION

PRESENTED TO:

DR. MOHAMMAD BAYEZID ALI

ASSOCIATE PROFESSOR

DEPARTMENT OF FINANCE

JAGANNATH UNIVERSITY, DHAKA.

PRESENTED BY:GROUP-04

GROUP: 4

SL NO.

ROLL NAME

1. B-120203032 RAJIB HUSSAIN

2. B-120203034 ASIBUL ISLAM MILU

3. B-120203043 TAJRIMA SULTANA SRISTI

4. B-120203045 MOHAMMAD WASHIM

5. B-120203047 RASEL AHAMED

6. B-120203055 SUJAN BHUIYAN

7. B-120203071 GAZI RAFSAN SHAHAB

8. B-120203137 AFRIN KHAN

9. B-110203091 EHSUN HOQUE

OUR TOPIC IS

CHANGES IN POTENTIAL GDP

RASEL AHAMEDID: B-120203047


When potential GDP changes, aggregate supply changes. An increase in potential GDP increase both long-run aggregate supply and short-run aggregate supply.

When potential GDP increases, both the LAS and SAS curves shift rightward.


Figure 11.4 shows an increase in potential GDP increases both long-run aggregate supply and short-run aggregate supply. The long-run aggregate supply curve shifts rightward from LAS0

to LAS1 and the short-run aggregate supply curve shifts from SAS0 to SAS1.


Potential GDP changes for any of three reasons:

1. The full-employment quantity of labor increases

2. The quantity of capital (physical or human) increases

3. Technology advances


1. The full-employment quantity of labor increases: The larger quantity of labor employed, the greater is

real GDP. With constant capital and technology, potential GDP

increases only if the full-employment quantity of labor increases.

Full employment occurs when the demand for labor is equal to the supply of labor, i.e., when the labor market is in equilibrium.


1. The full-employment quantity of labor increases:

For example, A Pepsi bottling plant that employs 100 workers bottles more Pepsi than does an otherwise identical plant that employs 10 workers.

AFRIN KHANID: B-120203137


2. The quantity of capital (physical or human) increases: Physical Capital

The accumulation of new capital increases capital per worker and increases labor productivity.

Human Capital

Human capital acquired through education, on-the-job training, and learning-by-doing is the most fundamental source of labor productivity growth.


2. The quantity of capital (physical or human) increases: So the larger quantity of physical capital and human

capital, the greater is potential GDP.

For example, potential GDP per person in the capital-rich USA is vastly greater than that in capital-poor China and Russia.

GAZI RAFSAN SHAHABID: B-120203071


3. Technological AdvancesTechnological change—the discovery and the application

of new technologies and new goods—has contributed immensely to increasing labor productivity.

Technological advances are by far the most important source of increased production over the past two centuries.

As a result of technological advances, one farmer in the United States today can feed 100 people and in a year one autoworker can produce almost 14 cars and trucks.

Business

changes in potential gdp