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Economic Growth Dillion Rath Bahjat Abuhadba Jessica Smith Compounded interest Compounded interest: is the concept of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on. N 1 Year 2 Semi 4 12 52 365 continuous P $ 10600.00 $ 10609.00 $ 10613.64 $ 10616.78 $ 10618.00 $ 10618.31 $ 10618.37 The Power of Compounded Rates People often underestimate the power of compounded interest Within a reasonable amount of time an investment earning compounded interest will accumulate a large percentage of the original investment Compounding principles can be applied to growth rates Facts To Consider Many countries such as China who started from far behind experienced super normal growth that exceeded 6% The real challenge is to maintain a stable and consistent growth rate for the long run In industrialized countries this sable rate is often estimated at 2-4% annually Growth in Income Formula Calculating the amount of time it will take to double something is calculated as follows: 72 / Growth Rate = time to double in Yrs Ex: India’s Growth @ 1.8% 72/1.8 = 40Yrs for India’s economy to double Growth and Recipes Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable Exp. Kitchen Cooking is limited by the supply of ingredients Majority of cooking produces undesirable side effects Growth and Recipes Can’t be achieved by doing more and more of the same kind of cooking Eventually run out of raw materials and suffer from pollution and nuisance How does Economic Growth Occur? Better recipes Produce fewer unpleasant side effects and generate more economic value per unit of raw material Exp. Coffee How does Economic Growth Occur? Big Discoveries Antibiotics, Electric Motor Million of little discoveries double average income in a nation Millions of undiscovered ideas that don’t add up, but they multiply What’s left to discover? Periodic Table 100 x99 x 98 x 97 = 94,000,000 combinations 6 ,2, 1, 7 different proportions = 3,500 94,000,000 x 3,500 = 330 Billion Recipes 1,000 per day = millions of years to evaluate Objects and Ideas Topics Economic growth due to new ideas Benefits of importing/exporting Foreign investments from firms The transistor movement Investments for new discoveries Innovation and Meta Ideas Innovation: performance and growth through improvements in efficiency, productivity, quality, competitive positioning, market share, etc. Meta-Ideas: Ideas that support the transmission of other ideas Innovation and Meta Ideas Example of Meta-Ideas: The patents and copyrights the British invented. The modern research university north Americans invented These ideas came to support human innovation and creativity. Facts to Consider about Meta-Ideas No matter how many ideas are out there; many others are still undiscovered. In today’s global environment; any new product or innovative idea is welcomed Many ideas have turned it’s developers to overnight entrepreneurs