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Unit 15. Economic Growth

This unit explores the factors of production, including natural resources, physical capital, human capital, entrepreneurship, and technological knowledge. It also discusses public policies that can promote economic growth, such as education, saving and investment, property rights, political stability, free trade, and research and development. The unit emphasizes the importance of education in generating new ideas for the production of goods and services and highlights challenges such as brain drain and the need for respecting property rights.

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Unit 15. Economic Growth

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  1. Unit 15. Economic Growth IES Lluís de Requesens (Molins de Rei)‏ Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi Franch Parella

  2. A country’s standard of living depends on its ability to produce goods and services • Productivity is the production per worker for each hour of goods and services • The growth rate per year (since 1900 until 2000) has been: Japan (2,81%), Brazil (2,45%), United States (1,81%), United Kingdom (1,35%), Pakistan (1,16%), Bangladesh (1,16%) …

  3. Factors of Production • Productivity plays a key role in determining living standards for all nations in the world • The factors of production are: natural resources, physical capital, human capital, entrepreneurship and technological knowledge • Physical capital are the intermediate goods (an input in the production process that in the past was an ouput)

  4. Factors of Production • Human capital is the knowledge and skills that workers acquire through education, training and experience • Natural resources are provided by nature (rivers, seas, land …). There are renewable resources (trees, forests …) and nonrenewable (coal, petroleum …) • Technological knowledge is the society’s understanding of the best ways to produce goods and services

  5. Public Policies • In order to raise living standards and productivity, the government can: • Encourage education and training • Encourage saving and investment • Secure property rights and maintain political stability • Promote free trade • Promote research and development • Encourage investment from abroad

  6. Long Term Policies • In the long run, the higher saving rate leads to a higher income and productivity • The catch-up effect is the property whereby the countries that start off poor tend to grow more rapidly than the countries that start off rich • In the long run, education is as important as investment in physical capital. An educated person can generate new ideas about the best way to produce goods and services

  7. Education • One of the most poignant problems of poor countries is the “brain drain”, that’s to say, the emigration of the most brilliant minds abroad • Also property rights have to be respected and maintained • Free trade is the same as enjoying a major technological advance

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