In this chapter you will see how economic growth differs around the world, consider why productivity is the key determinant of a country’s standard of living, analyze the factors that determine a country’s a country’s, examine how a country’s policies influence its productivity growth. | Review of the previous lecture The financial system is made up of financial institutions such as the bond market, the stock market, banks, and mutual funds. All these institutions act to direct the resources of households who want to save some of their income into the hands of households and firms who want to borrow. National income accounting identities reveal some important relationships among macroeconomic variables. In particular, in a closed economy, national saving must equal investment. Financial institutions attempt to match one person’s saving with another person’s investment. Review of the previous lecture The interest rate is determined by the supply and demand for loanable funds. The supply of loanable funds comes from households who want to save some of their income. The demand for loanable funds comes from households and firms who want to borrow for investment. National saving equals private saving plus public saving. A government budget deficit represents negative . | Review of the previous lecture The financial system is made up of financial institutions such as the bond market, the stock market, banks, and mutual funds. All these institutions act to direct the resources of households who want to save some of their income into the hands of households and firms who want to borrow. National income accounting identities reveal some important relationships among macroeconomic variables. In particular, in a closed economy, national saving must equal investment. Financial institutions attempt to match one person’s saving with another person’s investment. Review of the previous lecture The interest rate is determined by the supply and demand for loanable funds. The supply of loanable funds comes from households who want to save some of their income. The demand for loanable funds comes from households and firms who want to borrow for investment. National saving equals private saving plus public saving. A government budget deficit represents negative public saving and, therefore, reduces national saving and the supply of loanable funds. When a government budget deficit crowds out investment, it reduces the growth of productivity and GDP. Lecture 16 Production and Growth Instructor: Abbas Course code: ECO 400 Lecture Outline Economic Growth Around The World Productivity: Its Role And Determinants The Production Function Economic Growth And Public Policy Production and Growth A country’s standard of living depends on its ability to produce goods and services. Within a country there are large changes in the standard of living over time. In the United States over the past century, average income as measured by real GDP per person has grown by about 2 percent per year. Productivity refers to the amount of goods and services produced for each hour of a worker’s time. A nation’s standard of living is determined by the productivity of its workers. Economic Growth Around The World Living standards, as measured by real GDP per .
