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Block 5/4 – 5/5 1. Define the term “standard of living”. 2. List the qualities of life that characterize a high standard of living. Today we are going to explain the relationship between economic growth and standard of living. Ch. 12 Gross Domestic Product and Growth 12.3 “Economic Growth” Measuring Economic Growth GDP and Population Growth Econ production must grow to meet the growing populations demands Real GDP per capita is the best measure of standard of living GDP and Quality of Life GDP does not measure the distribution of wealth Capital Deepening Two types of labor force capital 1. Physical capital Equipment used to produce g/s 2. Human capital Training, skills and educ acquired by a worker The more you have the greater the commodity you become Both lead to increased output Saving and Investment Any money not spent on g/s is saved by individuals Banks then increase the amount of money available for loans Increase in loans leads to increased investment Increased investment leads to increased capital per worker Population, Government and Trade Population Growth In order for living standards to rise, capital must increase at a faster rate than population growth Ie: India Government Tax rate increase leads to less investment and vice versa Foreign Trade Trade deficit: the value of goods a country imports is greater than its exports Deficits are bad unless they are investment goods Technological Progress Measuring Technological Progress 1987 Robert Solow How much growth in output comes from capital How much growth in capital comes from labor The difference in growth comes from tech advancement Causes of Technological Progress 1. 2. 3. Scientific Research Innovation Scale of the market 4. 5. Larger markets provide greater incentive since potential profits are greater Education and experience Natural resource use Lead to new tech to: Harvest material Provide substitute New use for otherwise unusable resource or waste Water used for petro drilling Check for Understanding 1. How are saving and investment are related to economic growth? 2. Summarize the impact of population growth and govt. on economic growth. 3. List the causes and impacts of technological progress.