Economic Growth/Income Distribution
Terms in this set (12)
Increase in real GDP over a given period.
It is expressed as the rate of change of real GDP per year
Rule of 72
By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself.
Two ways to increase real GDP
1. Up Aggregate Hours
2. Up Labor Productivity
Growth in Aggregate Hours
Comes from increased population, increased involvement in the labor force, increased hours of workers
Growth in Labor Productivity
Comes from increased capital from new technologies, more education.
Classical/Malthusian Growth Theory
Economic growth will eventually come to end because increasing population will outstrip limited resources.
The only way to grow the economy is work more hours which you can only do for so long due to the law of diminishing returns
Neoclassical Growth Theory
real GDP per person will increase as long as technology continues to advance
As long as people continue to want new and improved stuff, the economy will continue to grow.
This is when people are able to make personal choices, their private property is protected which will give you more incentive to use your money in the way you want
Govern the protection of private property. If you are worried that you are going to lose your stuff, then you are less likely to spend money and promote economic growth.
Disparity in levels of income among individuals in the economy
A graphical representation of the distribution of income or of wealth
The X-Axis has the cumulative percent of the population while the Y-Axis has the cumulative percent of a total national income
Expresses the inequality of incomes in a single country in a numerical term between 0-1.
The smaller the area under the perfect equality line, the more equal the country in terms of income