What is Economic Growth?

* Economic growth is GDP growth in US

- if the total of goods and services produced grows,

so does economy

-> makes no difference how or why it grows

- GDP per capita also key

-> economy must grow to keep up with population

=> economy grows faster than pop. Living standards rise

=> economy grows slower than pop. We fall behind

-> in 1992,4.9 trillion GDP, 255 million Americans, $19,215

-> in 2009, 14.2 trillion GDP, 308 million Americans, $46,104

-> Since 1980, GDP per capita has grown slower than GDP

* Why economic growth is important

- standard of living can only rise with GDP rise

- growth enlarges the tax base

-> government will take in more money

=> can provide more services

=> can provide same services and cut taxes

-> declining GDP forces budget cuts or deficits

- more resources allows us to tackle new problems

-> electrification

-> highway system

-> man on the moon

- more resources allows us to help other nations

-> we robbed them for 200 years, perhaps we should repay

-> starving people are dangerous people

- can lord it over other nations

-> The USSR knew it could not keep up with our growth

-> people listen to us because we are successful

* What causes growth or the lack thereof

- land

-> easy access to natural resources allows easy growth

-> lack of resources can cause expensive imports or

hamstring industries

-> we were lucky and also stole what we did have

=> Panama Canal

=> Philippines

=> plantations in Latin America

- capital

-> money allows a country to make more money

-> factories, machinery, railroads, highways, etc. are

investments that cause more growth

-> Japan grew well because its people saved money

- labor

-> skilled labor force can produce more quickly an

efficiently

-> solid mass education system leads to growth

- entrepreneurs

-> skilled and unrestricted business leaders bring growth

=> American entrepreneurs dragged us forward

-> lack of entrepreneurship leads to stagnant growth

=> Soviet Union the great example of lack of innovation

* The Business Cycle

- expansion

- contraction

- peak/boom

- trough

- recession

- depression