Question

5. List the 3 categories of things that affect economic growth in the long run. 6. Which of the above categories probably explains most of the difference between rich countries and poor countries? 7. In the long run, money is 8. A conveys ownership of a company while a entitles the owner to a fixed amount of money in the future. 9. A riskier bond will have a price and a rate of return. 10. If output grows at 10% per year, how long will it take to double? 11. Countries experiencing "catching up growth" generally have growth rates and output levels (per person) than those experiencing "cutting edge growth."

Answer 1

5. Economic growth is the increase in the value of the goods and services an economy produces over time. Long run economic growth will be affected if long run aggregate supply shifts. Categories that affect economic growth in the long run are:

a) Productivity: Increased productivity (for example- technological advancement causes increase in productivity) will shift the long run aggregate supply curve rightward, and that will cause economic growth in the long run.

b) labor force participation : labor force participation is the amount of labors Available. Change in labor force participation shifts the long run aggregate supply and thus affect economic growth in the long run.

C) Demographic changes: Demographic factors affect long run economic growth by changing the employment to population ratio.