Chapter 15Economic Growth and Development

Economic Growth Real Per Capita GDP = Real

GDP/Population Real Per Capita GDP = Real GDP/Population Shifts in The PPC, shift the Real Potential GDP

(LRAS)

Components of Growth Increase the Quantity and Quality of Resources

Rate of Growth of Quantity of Capital Investment through savings

Rate of Growth of Quantity of Labor Population increases Immigration

Rate of Growth of Resource Quality – Productivity Labor

Education and Training Human Capital

Better health Health Care

Capital: Physical Capital– plant and equipment Technology

Types Invention – new products and ways to produce them Innovation – development of products and production processes commercially

Research and Development

Positive political and social environment Free trade Economic Freedom and Property Rights

Property Rights – the right of an owner to use and trade property Encourages entrepreneurial ship if we can keep things Promotes economic growth

Economic Freedom of Choice

Summary Saving Immigration Education Health Care Research and Development A Positive political and social environment Free trade Economic Freedom and Property Rights

Growth Results Causes more pollution Less resources Improves standard of living More leisure Crime rates fall More income More goods

Club of Rome In the next 100 years at the present rate of population growth, industrialization,

pollution, food production, and resource depletion this planet will reach its limit.

Bioeconomic world Lower incomes Basic Consumption Labor intensive production Use renewable resources

Switching Point Recycling Conservation Zero population growth

Economic Development Raising the standard of living in poor countries (75% of the world is in

poverty)

Less Developed Countries - LDC's Examples

South and East Asia Africa Middle East South and Central America

Characteristics Land - Rural/agricultural in a Tropical climate (Southern countries)

Bad infrastructure Economy - Low per capita income and Unemployment

Unskilled labor force Lack of Natural Resources

People - Rapid population growth with Inadequate health care and education High Birth rates Low life expectancy Malnutrition

Government: Control by wealthy elite Political instability

Characteristics cont. People - Rapid population growth with Inadequate

health care and education High Birth rates Low life expectancy Brain Drain Malnutrition High rates of illiteracy Underemployment Often women are second class citizens

Government: Control by wealthy elite Political instability

Solutions Peace Concentrate funds on capital and education

Encourage saving Research and Development

Foreign aid Property rights Control Population Growth

Obstacles Political instability and corruption Lack of investment (saving) and education Overpopulation and disease Cultural differences

Industrially Advanced Country (IAC) Examples

Western Europe North America Australia New Zealand Japan

Why would an IAC want to help a LDC? Ally Future trading partner

Policy Foreign aid Decrease tariffs and quotas Provide debt relief