CHAPTEREconomic Growth, the Financial10System, and Business CyclesChapterOutlineandLearningObjectives10.1Long-RunEconomicGrowth10.2Saving,Investment,andthe Financial System10.3TheBusinessCycle
1 Chapter Outline and Learning Objectives 10.1 Long-Run Economic Growth 10.2 Saving, Investment, and the Financial System 10.3 The Business Cycle CHAPTER 10 CHAPTER Economic Growth, the Financial System, and Business Cycles
Obtaining EconomicGrowthWe all want the United States to have a “strong" economy, since thiswill hopefully result in a better life for us and the people we careabout.: What does it mean for the economy to be “strong" vs. “weak"?In this chapter, we will explore what the concepts mean in the longterm, and also in the short-term.: In the short-term, this refers to the business cycle: alternatingperiods of economic expansion and economic recession.Wewill alsoexplore what sortsof things seemto lead to astrongervs.weakereconomy.@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 2 Obtaining Economic Growth We all want the United States to have a “strong” economy, since this will hopefully result in a better life for us and the people we care about. • What does it mean for the economy to be “strong” vs. “weak”? In this chapter, we will explore what the concepts mean in the longterm, and also in the short-term. • In the short-term, this refers to the business cycle: alternating periods of economic expansion and economic recession. We will also explore what sorts of things seem to lead to a stronger vs. weaker economy
Long-RunEconomicGrowth10.1LEARNINGOBJECTIVEDiscusstheimportanceoflong-runeconomicgrowth@2015PearsonEducation,lnc3
LEARNING OBJECTIVE © 2015 Pearson Education, Inc. 3 Long-Run Economic Growth 10.1 Discuss the importance of long-run economic growth
Long-RunEconomicGrowthRealGDPWhenwespeakoflong-runpercapita(2009 dollars)$50.000economicgrowth,wemean45,000the process by which rising40.000productivity increases the35,000average standardof living30,00025,000The most commonly used20,000measure of this average15,000standard of living is real GDP10,000per capita: the amount of5,000production in the economy,0190019101920193019401950196019701980199020002010per person, adjusted forFigure 10.1ThegrowthinrealGDPchanges in the price level.per capita, 1900-2012Asthechartshows,realGDPpercapitahasrisenmorethaneightfold since 1900; the average American can buy more than eighttimes as many goods and services now as in 1900.@2015Pearson Education,Inc
© 2015 Pearson Education, Inc. 4 Long-Run Economic Growth When we speak of long-run economic growth, we mean the process by which rising productivity increases the average standard of living. The most commonly used measure of this average standard of living is real GDP per capita: the amount of production in the economy, per person, adjusted for changes in the price level. As the chart shows, real GDP per capita has risen more than eightfold since 1900; the average American can buy more than eight times as many goods and services now as in 1900. The growth in real GDP per capita, 1900-2012 Figure 10.1
MakingEconomicProsperity andHealththeConnectionEconomicprosperityandLifeexpectancyhealth go hand-in-hand:atbirth1900(years)richernationscandevote201390more resources to80improving the health of70theircitizens,andhealthier60-citizens are more5040productive.30Whilegrowth inreal GDP20per capita is an important10measure ofour0UnitedUnitedIndiaFranceimprovement, anotherStatesKingdomimportant measure is theincrease in our lifespans;these have also increasedmarkedly over the lastcentury.@2015PearsonEducation.nc
© 2015 Pearson Education, Inc. 5 Making the Connection Economic Prosperity and Health Economic prosperity and health go hand-in-hand: richer nations can devote more resources to improving the health of their citizens, and healthier citizens are more productive. While growth in real GDP per capita is an important measure of our improvement, another important measure is the increase in our lifespans; these have also increased markedly over the last century