Download Labor Productivity and Long Run Growth

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Solve.
1.
Assume the US economy is currently at long run equilibrium with
an expected rate of inflation of 3%, natural unemployment rate of
5% and a nominal interest rate of 6%.
Using a graph of the short run and long run Phillips curve illustrate the US
economy. Label this equilibrium as point A.
(b) Calculate the real interest rate.
(c) Assume that the United States increases military spending by $100 B
(i) Identify the policy: discretionary or automatic. Explain.
(ii) Illustrate this event as point B on your graph from part (a)
(iii) How does the event from part (c) affect household expectations in the long
run?
(d) What is the impact of the increase in spending on the long run Phillips curve?
(a)
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Homework:
1. Mod. 37-40 Notes
• Open-notes quest Wednesday 2/4
2. Research Country
• Bring materials needed for
poster!
Labor Productivity & Long Run Growth
C-5, C-4, C-3: Students will demonstrate their understanding of the factors that contribute to long
run growth by researching multiple countries to draw conclusions about the institutions, history,
geography, culture, and technology that cause unequal growth
U.S. Labor Productivity 1947-2012 (per worker)
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+ Here’s a hint…
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+The Walmart Effect & Labor Productivity

Retail-labor productivity growth more than tripled after 1995
 Everyone
in retail business knew about computers but Walmart
figured out HOW to use them
 1995: Walmart
begins tracking inventory online, using barcode scanner,
and IT systems to communicate directly with supplier, all practices now
considered mainstream.
 1997: The company installed the largest private satellite communication
system in the U.S., linking the company's operations through voice, data
and video communication
 1999: Walmart celebrated its first $1 billion sales week.
 2000: Walmart.com was founded, allowing U.S. customers to shop online.
 2009: For the first time, Walmart exceeded $400 billion in annual sales.
 2015: 90% of all Americans live within 15 miles of a Walmart
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Sources of Growth in Productivity
1.
Physical Capital: human made goods used to produce other goods
and services (factories and machinery)
2.
Human Capital: the improvement in labor created by the education
and knowledge of members of the workforce
3.
Technology: technical means for the production of goods and services
*widely considered the most important
These 3 economic variable are the building blocks of long term
economic growth!
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How do we quantify long term growth?
 All
about Real GDP per capita
Calculation: real GDP/population
 Measures total value of all final goods and services produced in an economy, not
accounting for changes in price level (focused on real output)
 Link between real GDP and income has been proven, provides insight to
purchasing power of society
 By including “per capita” data we can isolate the effect of changes in the
population
 If GDP is constant while population grows, standard of living falls
 If GDP and population growth are both the same, standard of living is
unchanged

 Sustained
growth in Real GDP per capita occurs only when the output
generated per worker increases steadily (increase in labor productivity)
Economic
Growth
and
Productivity
Case
Study
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Assignment
So we know productivity = long run growth. How is productivity achieved?

How do we account for the different rates of growth across time and space?

What elements are crucial for long term growth and productivity?

Is it possible to generate long term economic growth in an economy from policy
actions?
Goal: Research the key factors of growth and productivity in 7 different nations, create a
poster to illustrate the state of economic growth focused on the major indicators: GDP
per capita, labor productivity (as a result of technology, human and physical capital),
natural resources, government, infrastructure, and property rights.
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Groups and Countries: P. 1

Dex, Tim, Nate…Iraq

James, Ally, Katherine…Venezuela

Cole, Zack, Quinn…Germany

April, Cameron, Willner…China

Jace, Jill, Dizzy…India

Chris, Grisha, Liam…Chad

Steph, Emma, Nick…Chile
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Groups and Countries: P. 2

Alan, Liam…Iraq

Matt(y), Conor…Venezuela

Biester, Taicher…Germany

Sloane, Phil…China

Mason, Laura, AJ…India

Nick, Steve…Chad

Ally, Jack…Chile
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Parke, Suhee…USA
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Groups and Countries: P. 3

Max, Jim, Frank…Iraq

Morgan, Oni, DuTot…Venezuela

Sophia, Courtney, Yuge…Germany

Purdy, Ethan, Nina…China

Kirin, Jonathan, Anna-Charlotte…India
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Grace, Dana, Katherine…Chad
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Reiss, Caroline, Ben…Chile
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Natalie, Nick, Ankine, Kaylee…U.S.A
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Groups and Countries: P. 4

Liz, Jack, John…Iraq

Sarah, Chris, Gloria…Venezuela

Matt, Megan, Ryan…Germany

Tyler, Katherine, Andy…China

Eli, Pat, Brett…India

Alex, Missy, Dylan…Chad

Chris, Selena, Christian…Chile

Liudas, Ryan, Ryann…U.S.A.
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Groups and Countries: P. 7

Amanda, John, Jess…Iraq

Ben, Tori, G…Venezuela

Sups, Aurora, Yikai…Germany

Alex, Kate, Bassi…China

Kees, Jimmy, Rob…India
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Matt, Jake, Manoo…Chad
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Presto, Dan, Sophia…Chile
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Emily, Chris, Zack…U.S.A
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Groups and Countries: P. 8
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Taicher, Elise, Nick…Iraq
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Dan, Max, Doms…Venezuela
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Rahul, Eric, Steve…Germany
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Friedman, Iredale, Paul…China
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Beer, Tom, Jenn…India
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Cook, Dana, Eddie…Chad
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Pepin, Cauley, Will…Chile