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Module 37 Long-run Economic Growth KRUGMAN'S MACROECONOMICS for AP* Margaret Ray and David Anderson What you will learn in this Module: • How we measure long-run economic growth • How real GDP has changed over time • How real GDP varies across countries • The sources of long-run economic growth • How productivity is driven by physical capital, human capital, and technological progress Real GDP per Capita •Real GDP per Capita – real GDP/population size •Not a policy goal unto itself Real GDP per Capita (Continued) Growth Rates Rule of 70 How many years it will take for the economy to double at a given rate of economic growth. # of years to double = (70/annual growth rate of the number) Rule of 70 The Sources of Long-Run Growth • Labor productivity and growth • Sustained growth in real GDP per capita occurs only when the amount of output produced by the average worker increase steadily. • Physical Capital – tools • Human Capital – education/training • Technology – collective body of knowledge used to build useful devices – GPS system.