1. ECONOMIC GROWTH 17 C H A P T E R

4. PRODUCTION POSSIBILITIES ANALYSIS Economic Growth A B C D a b Capital Goods Consumer Goods 0

5. PRODUCTION POSSIBILITIES ANALYSIS Labor and Productivity Real GDP = Hours of Work X Labor Productivity

7. GROWTH IN THE AD-AS MODEL A B C D Capital Goods Consumer Goods Price Level Real GDP AS LR1 AS LR2 Q 1 Q 2

8. ECONOMIC GROWTH IN THE EXTENDED AD – AS MODEL Price Level Real GDP o P 1 AS 2 AS LR1 AD 2 Q 1 AS LR2 Q 2 AD 1 AS 1 P 2

9. U.S. Economic Growth, Annual Averages for Five Decades 1950-1959 1960-1969 1970-1979 1980-1989 1990-1999 U.S. ECONOMIC GROWTH RATES Average Annual Increase (Percent) 5 4 3 2 1 0 Real GDP Real GDP Per Capita

10. ACCOUNTING FOR GROWTH Increase in Real GDP Increase in quantity of labor Increase in labor productivity Accounting for Growth of U.S. Output, 1960-2008 1960 Q2 to 1973 Q4 1973 Q4 to 1990 Q3 1990 Q3 to 2002 Q3 2002 Q3 to 2008 Q4* 4.2 1.6 2.6 2.9 1.6 1.3 2.9 0.9 2.0 3.2 1.4 1.8 *Rates beyond 2002 are projections Source: Economic Report of the President, 2003

11. Changes in the Educational Attainment of the U.S. Adult Population 1950 1960 1970 1980 1990 2000 ACCOUNTING FOR GROWTH Source: U.S. Census Bureau Percent of U.S. Population 100 80 60 40 20 0 College Graduates or More High School Graduates or More

12. GLOBAL PERSPECTIVE Average Test Scores, 8 th . Grade, 1999 Source: Third International Math and Science Study Mathematics Rank Score Science Rank Score 1 2 3 4 5 6 7 8 9 10 19 604 587 585 582 579 558 540 534 532 531 502 Singapore South Korea Taiwan Hong Kong(China) Japan Belgium Netherlands Slovak Republic Hungary Canada United States 1 2 3 4 5 6 7 8 9 10 18 569 568 552 550 549 545 540 539 538 535 515 Taiwan Singapore Hungary Japan South Korea Netherlands Australia Czech Republic United Kingdom Finland United States

13. IS GROWTH DESIRABLE AND SUSTAINABLE? The Antigrowth View In Defense of Economic Growth

15. Deficits, Surpluses and the Public Debt Chapter 18 Next...