Subject:
Economics
Material Type:
Module
Level:
Community College / Lower Division, College / Upper Division
Provider:
Ohio Open Ed Collaborative
Tags:
Macroeconomics
License:
Creative Commons Attribution Non-Commercial
Language:
English
Media Formats:
eBook, Text/HTML

Education Standards (3)

Long Run Economic Growth: Course Map & Recommended Resources

Overview

This lesson concerns how economic growth is measured and defined, the benefits of economic growth over time, and the determinants of a nation’s economic growth, including policy. Students will examine the importance of sustained economic growth over time.  Students will understand the meaning and determinants of economic growth. Comparative information and data for different economies over time will be utilized to examine the importance of policy and several factors as economic growth drivers. Students will examine the aggregate production function as a tool to understand the relationship between inputs and aggregate output.  The importance of technological progress will be emphasized.

 

Learning Objectives

  1. Define economic growth (5,13)
  2. Calculate the economic growth rate (5,13)

  3. Identify and calculate the measure of well-being (13)

  4. Utilize the rule of 72 (13)

  5. Identify characteristics and policies that promote economic growth and development (13,16)

  6. Define potential GDP (5,13)

  7. Explain what makes potential GDP increase (5,13)

  8. Explain the sources of labor productivity growth (5,13)

  9. Utilize the aggregate production function to distinguish between different sources of labor productivity growth (13)

NOTE: This Module meets Ohio TAG's 5, 13, 16 for an Intro to Macroeconomics Course

Recommended Textbook Resources

Principles of Macroeconomics 2e – Chapter 7: Economic Growth

  • This is an excellent discussion covering all the learning objectives, except 4, 6, and 7.  It provides a good discussion on economic growth without being very technical. It is very current in its approach to the use of comparative information to explain how differences in growth could make a significant difference in economic well-being.
  • Authored by: S. Greenlaw and Shapiro et. al (June 4, 2018). Provided by: Openstax CNX. 

Principles of Macroeconomics – Section 8.1: Economic Growth

  • Section 8.1, pages 267-276 supplements the OpenStax text on Economic Growth by providing a good explanation of potential output (GDP), its changes and policies that impact potential output. It explains and applies the Rule of 72, and discusses the computation of change in real GDP per capita.  It covers more accurately learning objectives 4, 6, and 7.
  • Authored by: University of Minnesota (2016). Provided by: University of Minnesota Libraries, CCA. 

Supplemental Content/Alternative Resources

The Wealth of Nations and Economic Growth: Geography and Economic Growth

  • In this video Alex Tabarrok explains the importance of geography in economic growth. Examples refer to the importance of location in economic growth in various parts of the world including advanced economies and less developed economies.
  • Authored by: MR University.

The Wealth of Nations and Economic Growth: The Importance of Institutions

  • In this video Tyler Cohen explains how and why institutions could have a significant impact on economic growth using North Korea and South Korea as examples. This can be assigned to further explain the sources of economic growth.
  • Authored by: MR University.

How 2,000-year-old Roads Predict Modern-Day Prosperity 

  • A brief review article on a study on the historical importance of infrastructure development and long-term prosperity.  The should serve as a supplement to the discussion on infrastructure and physical capital as important drivers of economic growth.

Topic Exercise

Exercise 1

Go to The World Bank and browse by country using the following link: https://data.worldbank.org/country

Select 4 different countries for your data analysis and repeat steps 1 to 5 below for each country.

  1. Obtain gross domestic product (GDP in current dollars) for the 5 most recent years when data is available.  

  2. Obtain national population for the same 5 years as GDP

  3. Calculate GDP per capita for the 5 years

  4. Compute annual growth rates (4) in per capita GDP for the chosen period.

  5. Using the final growth rate for each country, compute the estimated number of years it will take for GDP per capita to double

Exercise 2

Go to FRED and search real GDP per capita or Directly to the following link: https://fred.stlouisfed.org/graph/fredgraph.png?g=lGD7

The graph from the Federal Reserve shows the real GDP per capita for the U.S from 1947 to date (the most recent period the data is available.

  1. Go to Download

  2. Select Excel Data and the data will be downloaded in Excel

  3. Using a date for any year (2016-04-01), select the same date a year later (2017-04-01).

  4. Compute the change in real GDP per capita for the year in question. That is equal to: (real GDP per capita in 2017 - real GDP per capita in 2016)/(real GDP per capita in 2016).  Using the same data in Excel set the cursor to any cell and enter =(B293-B289)/B289

  5. Repeat the same computations for 2014 to 2015, 2015 to 2016, and 2017 to 2018.

Active Learning Exercise

Active Learning Exercise 1

Refer to and Continue Topic Exercise 1 in the Previous Section:  

Recall that we calculated real GDP per capita and economic growth rates for 4 countries other than the U.S. using https://data.worldbank.org/country.  

The link provides data on other indicators.  Select three other indicators provided for each of the four countries that you think could be potential long-term economic growth drivers.  Explain how these economic indicators may contribute to differences in the economic growth rates for the countries in question. Could these be appropriate inputs in the aggregate production functions for the respective countries? Provide a one-page summary of your rationale for selecting the economic indicators.

Active Learning Exercise 2

Go to FRED and search real GDP per capita for the U.S. or Directly to the following link: https://fred.stlouisfed.org/graph/?g=lG0M.

The graph shows the annual percentage change in U.S. real GDP from 1950 to 2017.  In the past twenty years, identify periods of recession for the U.S. and the maximum and minimum growth rates during those periods. Identify five periods of high annual economic growth rates for the U.S. Explain how these growth rates compare to those in recessionary years?