AP Macroeconomics AMSCO Guided Notes
5.6: Economic Growth
AP Macroeconomics Guided Notes
AMSCO 5.6 - Economic Growth
Essential Questions
- How does the economy expand and contract but grow in the long run?
A. What Is Economic Growth?
1. What is economic growth and how does it relate to productivity?
2. What are the four main determinants of economic growth?
3. How do rates of saving and investment affect economic growth?
4. What is the relationship between economic growth and standard of living?
1. Measuring Economic Growth
1. Why do economists measure the value of goods rather than just the total amount produced?
2. What is real GDP and how does it differ from nominal GDP?
3. Why is real GDP per capita a better indicator of economic growth than total real GDP?
B. Phases of Economic Growth
1. What are the four phases of the business cycle and how do they relate to economic growth?
2. What happens to an economy when it grows too fast, and what are the consequences of contraction?
C. Long-Run Economic Growth
1. Why is technology the most influential factor in driving long-run economic growth?
2. How does the law of diminishing returns affect the sustainability of growth from capital and labor?
1. Aggregate Production Function
1. What is the aggregate production function and what determinants of growth does it measure?
2. What are the two primary factors that determine labor productivity?
3. How do movements along the production function differ from shifts of the production function?
4. What does the concave shape of the production function illustrate about the relationship between inputs and output?
D. Economic Growth in Historical Perspective
1. What was Thomas Malthus's prediction about population and food production, and why did it not occur?
1. Diverging Economies
1. How did the distribution of global economic output change between 1750 and 1970?
2. What factors led to the divergence between the West and the developing world after the Industrial Revolution?
3. What were the key differences between the West and 'the Rest' by 1970 in terms of population, life expectancy, and income?
2. Convergence
1. What is convergence and which countries began to catch up with the West between 1970 and 2000?
2. How did economic changes in developing nations lead to social changes such as lower birth rates and improved health outcomes?
Key Terms
economic growth
real GDP
aggregate production function
productivity
real GDP per capita