Economic Problems

ECO 405 Week 8, Chapter 11: Economic Growth

|Slide # |Topic |Narration |
|1 |Intro |Welcome to Economic Problems and Issues. In this lesson, we will discuss Economic Growth. |
| | |Please go to the next slide. |
|2 |Objectives |Upon completion of this lesson, you will be able to understand: |
| | | |
| | |The concept of economic growth; |
| | |Short-Run fluctuations in economic growth; |
| | |The determinants of economic growth; and |
| | |The recent slowdown in growth. |
| | | |
| | |Please go to the next slide. |
|3 |The Concept of Economic |A growing economy is a sign of prosperity and the chance to improve our quality of life. |
| |Growth |Almost everyone agrees that a growing economy is preferred to one that is shrinking. But a |
| | |number of important questions surround this issue. To begin, how do we measure economic |
| | |growth, and how fast or slow should the economy grow? |
| | | |
| | |Economists view economic growth as a long-run process. It is not the result of a single event |
| | |but the compounding of many events. For the economy to grow, a number of things must occur. |
| | |The most frequently used measurement of economic growth is changes in real gross domestic |
| | |product, or GDP. |
| | | |
| | |How fast the economy is growing at any point in time is very important. Small differences in |
| | |growth rates today can translate into significant difference in the level of economic activity |
| | |in the future because economic growth compounds year after year. |
| | | |
| | |Please go to the next slide. |
|4 |Short-Run Fluctuations |For almost as long as markets have existed, people have been aware of fluctuations in the level|
| |in Economic Growth |of economic activity over time. Every market-based economy on record has experienced |
| | |historical periods of growth and prosperity followed by periods of declining production and |
| | |incomes. These fluctuations have come to be popularly known as business cycles. |
| | | |
| | |A business cycle is an erratic short-run fluctuation in economic activity around the economy’s |
| | |long-run growth trend. Every business cycle is composed of four distinct phases, they include:|
| | |expansion, peak, contraction, and trough. These four phases are illustrated on this slide. |
| | | |
| | |Business cycles are characterized as erratic because no two business cycles are exactly alike. |
| | |Business cycles vary in duration and the magnitude of their swings around the economy’s |
| | |long-run growth trend. Since 1960, the U.S. economy has experienced six complete business |
| | |cycles. |
| | | |
| | |Please go to the next slide. |
|5 |The Determinants of |Economists have identified a number of important factors that determine an economy’s rate of |
| |Economic Growth |growth. These determinants of economic growth can be classified into two major groups: |
| | |One. Availability of economic resources. |
| | |And two. Productivity factors. |
| | | |
| | |Please go to the next slide. |
|6 |The Recent Slowdown in |The rate of economic growth in the U.S. has averaged three-point-three-six percent per year. |
| |Growth |Official estimates dating back to the nineteenth century suggest that the historical rate of |
| | |growth averages between three and three-point-five percent per year. |
| | | |
| | |We also have discovered that the rate of growth appears to be in a slow down. In the 1960s, |
| | |economic growth averaged four-point-four-three percent per year, but the 1990s saw an average |
| | |annual growth rate of only three percent. |
| | | |
| | |There is no straightforward answer to why there is an economic slowdown. Many factors may have|
| | |contributed to the recent slowdown in economic growth. A list of the major factors economists |
| | |have identified include the following: |
| | | |
| | |The first is a technology slowdown, second is labor force factors, third is saving and |
| | |investment, and fourth is the composition of output, and regulation and public debt of the |
| | |government. |
| | | |
| | |Please go to the next slide. |
|7 |Check Your Understanding| |
|8 |Summary |We have now reached the end of this lesson. Let’s take a look at what we’ve covered. |
| | | |
| | |First, we defined the concept of economic growth. A growing economy is a sign of prosperity and|
| | |the chance to improve our quality of life. Economists view economic growth as a long-run |
| | |process. The most frequently used measurement of economic growth is changes in real gross |
| | |domestic product, or GDP. |
| | | |
| | |Next, we discussed short-run fluctuations in economic growth time. Every market-based economy |
| | |on record has experienced historical periods of growth and prosperity followed by periods of |
| | |declining production and incomes. These fluctuations have come to be popularly known as |
| | |business cycles. A business cycle is an erratic short-run fluctuation in economic activity |
| | |around the economy’s long-run growth trend. Every business cycle is composed of four distinct |
| | |phases, they include: expansion, peak, contraction, and trough. |
| | | |
| | |Then, we identified determinants of economic growth. Economists have identified a number of |
| | |important factors that determine an economy’s rate of growth. These determinants of economic |
| | |growth can be classified into two major groups: Availability of economic resources and |
| | |productivity factors. |
| | | |
| | |Finally, we concluded the lesson with a discussion on the recent slowdown in growth. In the |
| | |1960s, economic growth averaged four-point-four-three percent per year, but the 1990s saw an |
| | |average annual growth rate of only three percent. There is no straightforward answer to why |
| | |there is an economic slowdown. Many factors may have contributed to the recent slowdown in |
| | |economic growth. |
| | | |
| | |This completes this lesson. |