Economic Growth
| English | Chinese | Pinyin |
|---|---|---|
| Economic growth | 经济增长 | jīng jì zēng zhǎng |
| real GDP | 实际国内生产总值 | shí jì guó nèi shēng chǎn zǒng zhí |
| real GDP per capita | 人均实际国内生产总值 | rén jūn shí jì guó nèi shēng chǎn zǒng zhí |
| Physical capital | 实物资本 | shí wù zī běn |
| Human capital | 人力资本 | rén lì zī běn |
| research and development | 研究与开发 | yán jiū yǔ kāi fā |
| productivity | 生产率 | shēng chǎn lǜ |
| institutions | 制度 | zhì dù |
| property rights | 产权 | chǎn quán |
Growth is the LRAS moving right
- Economic growth 经济增长 is a rise in an economy's potential output over time.
- On the AD-AS diagram it is the LRAS curve shifting right — the PPF pushing outward.
- It is what raises living standards decade after decade.
- We measure it as the growth rate of real GDP 实际国内生产总值.
On the AD-AS diagram, long-run economic growth appears as:
More potential output means LRAS shifts right.
Real GDP grows 5% and the population grows 2%. Approximate per-capita growth, in percent?
Per-capita growth ≈ 5 − 2 = 3%.
Per-capita growth is what people feel
- Total real GDP can grow just because the population grew.
- What matters for living standards is real GDP per capita 人均实际国内生产总值.
- Rule: $\text{per-capita growth} \approx \text{real GDP growth} - \text{population growth}$.
- Worked idea. Real GDP grows $5\%$, population grows $2\%$. Per-capita growth $\approx 5 - 2 = 3\%$.
Does it raise long-run growth?
Growth comes from more physical capital, human capital, and technology — all raising productivity. A one-off demand boost is not long-run growth.
Which of these raise long-run growth? (Select all that apply)
Capital, skills, and technology grow capacity; a demand blip only shifts AD.
The education, skills, and health of the workforce are called ______ capital.
Human capital raises how much each worker can produce.
Rising productivity means more output from each hour of work.
That is exactly what productivity measures — output per worker-hour.
The engines of growth
- Physical capital 实物资本 — more machines, tools, and infrastructure per worker.
- Human capital 人力资本 — education, skills, and health of the workforce.
- Technology and R&D — research and development 研究与开发 that finds better ways to produce.
- Together these raise productivity 生产率: more output from each worker-hour.
Secure property rights and stable institutions matter for growth because they:
If people can keep what they build, they invest and innovate.
Why institutions matter
- Growth needs the right rules: secure property rights 产权 so people keep what they build.
- Stable institutions 制度 — courts, honest government, working markets — let investment pay off.
- Without them, capital and talent flee, and good ideas never get funded.
- This is why two countries with similar resources can grow at very different rates.
Economic growth shifts LRAS right (real GDP rises over time). Per-capita growth $\approx$ real GDP growth $-$ population growth ($5\% - 2\% = 3\%$). It comes from physical capital, human capital, and R&D raising productivity — all resting on secure property rights and stable institutions.