Chapter 16 - Economic growth and the new economy. In this chapter, the following content will be discussed: About the ingredients of economic growth, about production possibility analysis, about Canada’s economic growth rates, about productivity growth and the new economy.
ECONOMIC GROWTH & THE NEW ECONOMY Chapter 16 SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 In this chapter you will learn About the ingredients of economic growth About production possibility analysis About Canada’s economic growth rates About productivity growth and the new economy © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 Chapter 16 Topics Ingredients of Growth Production Possibilities Analysis Canadian Economic Growth Rates Accounting for Growth Productivity Growth & the New Economy Is Growth Desirable & Sustainable? © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 Ingredients of Growth Supply Factors natural resources â 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 Ingredients of Growth Supply Factors • natural resources human resources â 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 Ingredients of Growth Supply Factors • • • natural resources human resources capital goods © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 Ingredients of Growth Supply Factors • • • • natural resources human resources capital goods technology © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 Ingredients of Growth Supply Factors • • • • natural resources human resources capital goods technology Demand Factor • households & businesses must purchase the economy’s output Efficiency Factor economic efficiency & full employment â 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 Chapter 16 Topics Ingredients of Growth Production Possibilities Analysis Canadian Economic Growth Rates Accounting for Growth Productivity Growth & the New Economy Is Growth Desirable & Sustainable? © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 Production Possibilities Analysis Growth & Production Possibilities Capital goods Figure 16-1 C A b Economic growth a B D Consumer goods © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 10 Accounting for Growth Technological Advance • process innovation • product innovation © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 23 Accounting for Growth Quantity of Capital • almost 45% of the annual growth of real output since 1961 is attributable to increases in the quantity of capital • public investment in infrastructure also important © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 24 Accounting for Growth Education & Training • educational attainment has increased • concerns about quality © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 25 Accounting for Growth Resource Allocation & Scale Economies • • economies of scale improved resource allocation – labour shifts from agriculture to manufacturing © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 26 Accounting for Growth Resource Allocation & Scale Economies • • economies of scale improved resource allocation – labour shifts from agriculture to manufacturing – decline in discrimination © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 27 Accounting for Growth Resource Allocation & Scale Economies • • economies of scale improved resource allocation – labour shifts from agriculture to manufacturing – decline in discrimination – liberalized trade © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 28 Accounting for Growth Other Factors • the social-cultural-political environment has fostered growth • market system stable political system â 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 29 Chapter 16 Topics Ingredients of Growth Production Possibilities Analysis Canadian Economic Growth Rates Accounting for Growth Productivity Growth & the New Economy Is Growth Desirable & Sustainable? © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 30 Productivity Growth & the New Economy Characteristics of the New Economy • The Microchip & Information Technology • New Firms & Increasing Returns – more specialized inputs – spreading of development costs – simultaneous consumption – network effects – learning-by-doing © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 31 Productivity Growth & the New Economy Characteristics of the New Economy • The Microchip & Information Technology • New Firms & Increasing Returns • Global Competition Macroeconomic Implications • Faster, Non-Inflationary Growth • Low Natural Rate of Unemployment • Growing Tax Revenues © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 32 Productivity Growth & the New Economy Skepticism about the New Economy © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 33 Chapter 16 Topics Ingredients of Growth Production Possibilities Analysis Canadian Economic Growth Rates Accounting for Growth Productivity Growth & the New Economy Is Growth Desirable & Sustainable? © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 34 Is Growth Desirable & Sustainable? The Antigrowth View • environmental costs • distribution vs production sustainability â 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 35 Is Growth Desirable & Sustainable? In Defense of Economic Growth • • • • higher living standards growth enables societal improvements working conditions have improved limiting growth not the solution to environmental problems growth is sustainable â 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 36 Chapter 16 Topics Ingredients of Growth Production Possibilities Analysis Canadian Economic Growth Rates Accounting for Growth Productivity Growth & the New Economy Is Growth Desirable & Sustainable? © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 37 ... & the New Economy Is Growth Desirable & Sustainable? © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 30 Productivity Growth & the New Economy Characteristics of the New Economy • The. .. Productivity Growth & the New Economy Is Growth Desirable & Sustainable? © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 16 19 Accounting for Growth Post-1950 productivity growth greater... GDP Macroeconomics, Chapter 16 15 Chapter 16 Topics Ingredients of Growth Production Possibilities Analysis Canadian Economic Growth Rates Accounting for Growth Productivity Growth & the New Economy