Economic growth is the rate of
change of real income or real
output.
The production function
shows the maximum output
obtainable from specified quantities of inputs, given the existing technical knowledge.
Depletable resources can be
used only once. Renewable
resources can used again if not
over-exploited.
Technical advances in
productivity come through
invention, the discovery of new
knowledge, and innovation,
the incorporation of new
knowledge into actual
production techniques.
Along the steady-state path,
output, capital and labour grow
at the same rate. Hence output
per worker and capital per
worker are constant.
In a growing economy, capital widening
extends the existing
capital per worker to new extra
workers. Capital-deepening
raises capital per worker for all
workers.
Labour-augmenting technical
progress increases the
effective labour supply.
The convergence hypothesis
asserts that poor countries
grow more quickly than average
but rich countries grow more
slowly than average.
The part of output growth not
explained by the growth of
measured inputs is known as
the Solow residual.
Endogenous growth implies
the steady-state growth rate is
affected by economic behaviour
and economic policy.
The zero-growth proposal
argues that, because higher
measured GNP imposes
environmental costs, it is best
to aim for zero growth of
measured GNP.
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