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I. A.

Economists define and measure economic growth as either (a) an increase in real GDP occurring over some time period, or (b) an increase in real GDP per capita over some time period. With either definition, economic growth is calculated as a percentage rate of growth per quarter or per year. B. Economic growth is important because it lessens the burden of scarcity. Economic growth means a higher standard of living, provided population does not grow even faster. And if it does, then economic growth is even more important to maintain than the current standard of living. Economic growth allows the lessening of poverty even without an outright redistribution of wealth. C. The difference between 2.5% and 3% growth annually can be of great significance over a long period of time, in this case a decade, because, when this difference is compounded and multiplied, the difference is vast. This is because you're multiplying that by trillions of dollars. Therefore, 0.5 percent means a lot of money and a lot of economic activity. Furthermore, over the long term the effect multiplies therefore if Country A had 2.5% growth while B had 3% growth then starting at 100, in ten years A would have 128 while B would have 134 a 6% more increase from ten years ago.

II. A. Modern Economic Growth is characterized by sustained and ongoing increases in living standards that can cause dramatic increases in the standard of living within less than a single human lifetime. Economic growth and sustained increases in living standards are a historically recent phenomenon that started with the Industrial Revolution of the late 1700s. Economic historians informally date the start of the Industrial Revolution at 1776, when the Scottish inventor James Watt perfected a powerful and efficient steam engine. This steam engine inaugurated the modern era since the device could be used to drive the industrial factory equipment, steamships, and steam locomotives. B. The major institutional factors that form the foundation for modern economic growth are the following: the advancement of technology, better educated workforce, and increase in the production of capital and finished goods. Due to the advancement in technology, more goods were produced by a country. People who were living in the suburbs and were into agriculture shifted into the cities where new industrial factories were concentrated. With these increase in workforce and technology, more and more goods were produced. C. These three factors are all major factors as to the inauguration of modern economic growth. All of these factors are now used as gauges in determining whether a countrys economy is experiencing betterment of their living standards, or increase in economic growth or not.

III. A. The supply factors are the changes in the physical and technical agents of production. The four supply factors are the (1) quantity and quality of natural resources, (2) the quantity and quality of human resources, (3) the stock of capital goods, and (4) the level of technology.

B. The demand factor is the level of purchases needed to maintain full employment. It is the increase in level of aggregate demand that brings about the economic growth made possible by an increase in the production potential of an economy. C. The efficiency factor refers to the capacity of an economy to combine resources effectively to achieve growth of real output that the supply factors make possible.

IV. Real hourly wage average represents the average purchasing power of the wage each worker receives. Purchasing power refers to the amount of output that can be obtained with that wage. If output per worker is not increasing, then the amount of output available per capita for workers to buy will not be growing either. In other words the real wage changes only if there is an increase in productivity. Nominal wages dont represent purchasing power.

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