Overview
Purpose:
To show two of the major determinants of the economy’s growth in the 20th century, and to examine whether the continuation of growth is threatened by the depletion of natural resources.
Objectives:
1. Approximately one-third of the growth in output per person is due to the increasing quantity of capital per worker and economies of scale.
2. Technological change may have accounted for half of the economy’s growth.
3. Scarcity of natural resources may impede economic growth but such scarcities have been overcome in the past.
a) prices will increase for useful resources that become scarce, encouraging conservation, substitutes, and the utilization of high-cost sources of the scarce resources.
b) New technologies may reduce the economy’s dependence on the depleted resources.
| Key Economic Concepts technological change, capital investment, forgone consumption, labor productivity, price incentives, economies of scale, capital/output ratio. |
| Contemporary Issues During the 1990s trend economic growth was between 3% and 3.5% in the U.S., between 2% and 2.5% in Europe, and between 1% and 1.5% in Japan. What accounted for these differences? Part of the answer was demographics. Population growth, which is one of the key determinants of growth, was growing faster in the U.S. than in Europe or Japan. The other key driver of long-term growth is productivity, which was also growing faster in the U.S. than in the other two economies, largely because of rapid changes in technology. What can economies do to boost long-term growth (population growth and/or productivity growth)? |
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