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1、THE REAL THE REAL THE REAL THE REAL ECONOMY IN ECONOMY IN ECONOMY IN ECONOMY IN THE LONG RUNTHE LONG RUNTHE LONG RUNTHE LONG RUN8/26/20242Production and GrowthSaving, Investment, and the Financial SystemUnemployment and Its Natural Rate8/26/20243Production and GrowthA countrys standard of living dep
2、ends on its ability to produce goods and services.8/26/20244Economic Growth around the World8/26/20245Living standards, as measured by realGDPperperson, vary significantly among nations.Within a country there are large changes in the standard of living over time.8/26/20246To understand the large dif
3、ferences in living standards across countries, the production of goods and services must be focused on.8/26/20247Productivity: Its Role and DeterminantsProductivity plays a key role in determining living standards for all nations in the world. 8/26/20248Productivity refers to the amount of goods and
4、 services produced from each unit of inputs.8/26/20249How productivity is determined?Thefactorsofproductiondirectlydetermineproductivity.theinputsusedtoproducegoodsandservices8/26/202410PhysicalcapitalHumancapitalNaturalresourcesTechnologicalknowledge8/26/202411Physical Capitalisaproducedfactorofpro
5、duction.isthestockofequipmentandstructuresthatareusedtoproducegoodsandservices.Toolsusedtobuildorrepairautomobiles,buildfurniture,Officebuildings,schools,etc.Itisaninputintotheproductionprocessthatinthepastwasanoutputfromtheproductionprocess.8/26/202412istheeconomiststermfortheknowledgeandskillsthat
6、workersacquirethrougheducation,training,andexperience.Human CapitalHumanresourcesHumaninvestment8/26/202413Natural Resourcesinputsusedinproductionthatareprovidedbynature,suchasland,rivers,andmineraldeposits.canbeimportantbutarenotnecessaryforaneconomytobehighlyproductiveinproducinggoodsandservices.r
7、enewableresourcesnonrenewableresources8/26/202414societysunderstandingofthebestwaystoproducegoodsandservices.ApplicationoftechnologicalknowledgeplaysthekeyroleinjumpingoutofNeo-MalthusianModelofpopulationtrap.Technological Knowledge8/26/202415Economic Growth and Public PolicyGovernments can do many
8、things to raise productivity and living standards.8/26/202416Encourage saving and investment.Encourage investment from abroad.Encourage education and training.Establish secure property rights and maintain political stability.Promote free trade.Promote research and development.GovernmentPolicies whic
9、h raise productivity and living standards.8/26/202417The Importance of Saving and InvestmentOnewaytoraisefutureproductivityistoinvestmorecurrentresourcesintheproductionofcapital.8/26/202418Harrod-Domarmodel（1）g=s/V（2）Y/Y=s（Y/K）KarlMarxg=s ViciousCycleofPovertyParadoxofThriftyTherelationshipbetweenSa
10、ndg8/26/202419(a)GrowthRate19601991(b)Investment19601991South KoreaSingaporeJapanIsraelCanadaBrazilWest GermanyMexicoUnited KingdomNigeriaUnited StatesIndiaBangladeshChileRwandaSouth KoreaSingaporeJapanIsraelCanadaBrazilWest GermanyMexicoUnited KingdomNigeriaUnited StatesIndiaBangladeshChileRwandaIn
11、vestment(percentofGDP)GrowthRate(percent)01234567010203040TherelationshipbetweenIandg8/26/202420Rostoviantake-offmodel(thetheoryofstageofeconomicgrowth)RosensteinRodan:Thetheoryofthebig-pushDiminishingReturnsAsthestockofcapitalrises,theextraoutputproducedfromanadditionalunitofcapitalfalls.8/26/20242
12、1HighgrowthrateHighlevelofgrowthInthelongrun,thehighersavingrateleadstoahigher levelhigher levelofproductivityandincome,but nottohigher growthhigher growthintheseareas.Becauseofdiminishing returns,anincreaseinthesavingrateleadstohighergrowthonlyforawhile.8/26/202422Thecatch-up effect referstotheprop
13、ertywherebycountriesthatstartoffpoortendtogrowmorerapidlythancountriesthatstartoffrich.themostimprovedonethebestoneLate-developmentAdvantage8/26/202423InvestmentfromAbroadGovernmentscanincreasecapitalaccumulationandlong-termeconomicgrowthbyencouraginginvestmentfromforeignsources.ForeignaidForeigninv
14、estmentForeigndebt8/26/202424TheoreticalSourceTwo-gapModelIS = MX8/26/202425Investmentfromabroadtakesseveralforms:ForeignPortfolioInvestmentInvestmentsfinancedwithforeignmoneybutoperatedbydomesticresidents.ForeignDirectInvestmentCapitalinvestmentownedandoperatedbyaforeignentity.TransnationalCorporat
15、ions/BOT8/26/202426EducationForacountryslong-rungrowth,educationisatleastasimportantasinvestmentinphysicalcapital.AnalysisofeducationbaseduponCostBenefit8/26/202427Aneducatedpersonmightgeneratenewideasabouthowbesttoproducegoodsandservices,whichinturn,mightentersocietyspoolofknowledgeandprovideanexte
16、rnalbenefittoothers.8/26/202428ProblemsfacingsomepoorcountriesincludeEducation deepening/knowledge unemploymentBrain drain (external) whichmeanstheemigrationofmanyofthemosthighlyeducatedworkerstorichcountries.Internal Brain drain身在曹营心在汉身在曹营心在汉8/26/202429PropertyRightsandPoliticalStabilityProperty ri
17、ghtsrefertotheabilityofpeopletoexerciseauthorityovertheresourcestheyown.Aneconomy-widerespectforpropertyrightsisanimportantprerequisiteforthepricesystemtowork.Itisnecessaryforinvestorstofeelthattheirinvestmentsaresecure.8/26/202430Inward -oriented Inward -oriented tradepolicies,avoidinginteractionwi
18、thothercountries.primaryinward-lookingsecondaryinward-looking(importsubstitution)Outward -orientedOutward -oriented tradepolicies,encouraginginteractionwithothercountries.primaryoutward-lookingsecondaryoutward-looking(exportpromotion)FreeTrade8/26/202431ResearchandDevelopmentR&Disthefirststageoftech
19、nologicalprogress.Theadvanceoftechnologicalknowledgehasledtohigherstandardsofliving.Mosttechnologicaladvancecomesfromprivateresearchbyfirmsandindividualinventors.Governmentcanencouragethedevelopmentofnewtechnologiesthroughresearchgrants,taxbreaks,andthepatentsystem.8/26/202432TechnologicalProgressR&
20、DTechnicalInnovationTechnicalDiffusionAcquisitionTransferAppropriatetechnologyIntermediatetechnology8/26/202433PopulationGrowthEconomistsandothersocialscientistshavelongdebatedhowpopulationgrowthaffectsasociety.8/26/202434Populationgrowthinteracts withotherfactorsofproduction:Stretchingnaturalresour
21、cesMalthusianPopulationTheoryDilutingthecapitalstockNeo-classicaleconomicgrowthmodelPromotingtechnologicalprogress8/26/202435TheFinancialSystemconsistsofthegroupofinstitutionsintheeconomythathelptomatchonepersonssavingwithanotherpersonsinvestment,thatis,coordinatetheactionsofsaversandborrowers.Itmov
22、estheeconomysscarceresourcesfromsaverstoborrowers.8/26/202436FinancialInstitutionsintheEconomyFinancialinstitutionscanbegroupedintotwodifferentcategories:financial marketsandfinancial intermediaries.8/26/202437Financial Marketsaretheinstitutionsthroughwhichsaverscandirectlyprovidefundstoborrowers.Bo
23、ndMarketStockMarketFinancial Intermediariesarefinancialinstitutionsthroughwhichsaverscanindirectlyprovidefundstoborrowers.BanksMutualFunds8/26/202438BondMarketBond isacertificateofindebtednessthatspecifiesobligationsoftheborrowertotheholderofthebond.CharacteristicsofaBondTerm:Thelengthoftimeuntilthe
24、bondmatures.Credit Risk:Theprobabilitythattheborrowerwillfailtopaysomeoftheinterestorprincipal.Tax Treatment:Thewayinwhichthetaxlawstreattheinterestonthebond.FinancialMarkets8/26/202439StockMarketStock representsaclaimtopartialownershipinafirmandistherefore,aclaimtotheprofitsthatthefirmmakes.Thesale
25、ofstocktoraisemoneyiscalledequity financing.Compared to bonds,stocksofferbothhigherriskandpotentiallyhigherreturns.8/26/202440Bankstakedepositsfrompeoplewhowanttosaveandusethedepositstomakeloanstopeoplewhowanttoborrow.paydepositorsinterestontheirdepositsandchargeborrowersslightlyhigherinterestonthei
26、rloans.FinancialIntermediaries8/26/202441Bankshelpcreateamedium of exchangebyallowingpeopletowritechecksagainsttheirdeposits.A medium of exchanges isanitemthatpeoplecaneasilyusetoengageintransactions.Thisfacilitatesthepurchasesofgoodsandservices.8/26/202442MutualFunds isaninstitutionthatsellssharest
27、othepublicandusestheproceedstobuyaportfolio,ofvarioustypesofstocks,bonds,orboth.Theyallowpeoplewithsmallamountsofmoneytoeasilydiversify.8/26/202443OtherFinancialInstitutionsCreditunionsPensionfundsInsurancecompaniesLoansharks8/26/202444SavingandInvestmentintheNationalIncomeAccountsRecallthatGDPisbot
28、htotalincomeinaneconomyandtotalexpenditureontheeconomysoutputofgoodsandservices:Y = C + I + G + NX8/26/202445SomeImportantIdentitiesAssumeaclosed economyclosed economyonethatdoesnotengageininternationaltrade:Y=C+I+GY=C+I+G8/26/202446Now,subtractCandGfrombothsidesoftheequation:Y C G =ITheleftsideofth
29、eequationisthetotalincomeintheeconomyafterpayingforconsumptionandgovernmentpurchasesandiscallednational saving, orjustsaving (S).SubstitutingSforY - C - G,theequationcanbewrittenas: S = I8/26/202447Nationalsaving,orsaving,isequalto:S = IS = IS = Y C G S = Y C G S = (Y S = (Y Tn C) + ( C) + (Tn G) G)
30、8/26/202448TheMeaningofSavingandInvestmentNational Savingisthetotalincomeintheeconomythatremainsafterpayingforconsumptionandgovernmentpurchases.Private Saving= (Y = (Y T Tn n C) C)istheamountofincomethathouseholdshaveleftafterpayingtheirtaxesandpayingfortheirconsumption.Public Saving= ( (T Tn n G) G
31、).istheamountoftaxrevenuethatthegovernmenthasleftafterpayingforitsspending.8/26/202449IfT G,thegovernmentrunsabudget surplus becauseitreceivesmoremoneythanitspends.ThesurplusofT - Grepresentspublic saving.IfG T,thegovernmentrunsabudget deficit becauseitspendsmoremoneythanitreceivesintaxrevenue.Surpl
32、us and Deficit8/26/202450Fortheeconomyasawhole,asawhole,savingmustbeequaltoinvestment. S = I8/26/202451TheMarketforLoanableFundsFinancialmarketscoordinatetheeconomyssavingandinvestmentinthemarket for loanable funds. isthemarketinwhichthosewhowanttosavesupplyfundsandthosewhowanttoborrowtoinvestdemand
33、funds.8/26/202452LoanableLoanablefundsfundsreferstoallincomethatpeoplehavechosentosaveandlendout,ratherthanusefortheirownconsumption.8/26/202453SupplyandDemandforLoanableFundsThesupplyofloanablefunds comesfrompeoplewhohaveextraincometheywanttosaveandlendout.Thedemandforloanablefunds comesfromhouseho
34、ldsandfirmsthatwishtoborrowtomakeinvestments.8/26/202454Theinterestrateisthepriceoftheloan.Itrepresentstheamountthatborrowerspayforloansandtheamountthatlendersreceiveontheirsaving.Theinterestrateinthemarketforloanablefundsistherealinterestrate.8/26/202455Financialmarketsworkmuchlikeothermarketsinthe
35、economy.Theequilibriumofthesupplyanddemandforloanablefundsdeterminesthereal real interest rateinterest rate. .8/26/202456LoanableFunds(inbillionsofdollars)0InterestRateSupplyDemand5%$1,200TheMarketforLoanableFunds8/26/202457GovernmentpoliciesthataffectsavingandinvestmentTaxesandsavingTaxesandinvestm
36、entGovernmentbudgetdeficits8/26/202458Policy1:SavingIncentivesTaxesoninterestincomesubstantiallyreducethefuturepayofffromcurrentsavingand,asaresult,reducetheincentivetosave.8/26/202459Ataxdecreaseincreasestheincentiveforhouseholdstosaveatanygiveninterestrate.Thesupplyofloanablefundscurveshiftstother
37、ight.Theequilibriuminterestratedecreases.Thequantitydemandedforloanablefundsincreases8/26/202460LoanableFunds(inbillionsofdollars)0InterestRateS1S22.whichreducestheequilibriuminterestrate.3.andraisestheequilibriumquantityofloanablefunds.Demand1.Taxincentivesforsavingincreasethesupplyofloanablefunds.
38、5%$1,2004%$1,600AnIncreaseintheSupplyforLoanableFunds8/26/202461Ifachangeintaxlawencouragesgreatersaving,theresultwillbelowerinterestratesandgreaterinvestment.8/26/202462Policy2:InvestmentIncentivesAninvestmenttaxcreditincreasestheincentivetoborrow.Increasesthedemandforloanablefunds.Shiftsthedemandc
39、urvetotheright.Resultsinahigherinterestrateandagreaterquantitysaved.8/26/202463Ifachangeintaxlawsencouragesgreaterinvestment,theresultwillbehigherinterestratesandgreater saving.8/26/202464LoanableFunds(inbillionsofdollars)0InterestRate1.Aninvestmenttaxcreditincreasesthedemandforloanablefunds.2.which
40、raisestheequilibriuminterestrate.3.andraisestheequilibriumquantityofloanablefunds.SupplyD1D25%$1,2006%$1,400AnIncreaseintheDemandforLoanableFunds8/26/202465Policy3:GovernmentBudgetDeficitsandSurplusesWhenthegovernmentspendsmorethanitreceivesintaxrevenues,theshortfalliscalledthebudget deficit.Theaccu
41、mulationofpastbudgetdeficitsiscalledthegovernmentdebt.8/26/202466Governmentborrowingtofinanceitsbudgetdeficitreducesthesupplyofloanablefundsavailabletofinanceinvestmentbyhouseholdsandfirms.Thisfallininvestmentisreferredtoascrowding out.Thedeficitborrowingcrowdsoutprivateborrowerswhoaretryingtofinanc
42、einvestments.8/26/202467Abudgetdeficitdecreasesthesupplyofloanablefunds.Shiftsthesupplycurvetotheleft.Increasestheequilibriuminterestrate.Reducestheequilibriumquantityofloanablefunds8/26/202468LoanableFunds(inbillionsofdollars)0InterestRateS22.whichraisestheequilibriuminterestrate.S1Demand$1,2005%$8
43、006%1.Abudgetdeficitdecreasesthesupplyofloanablefunds.TheEffectofaGovernmentBudgetDeficit3.andreducestheequilibriumquantityofloanablefunds.8/26/202469Whengovernmentreducesnationalsavingbyrunningadeficit,theinterestraterisesandinvestmentfalls.Abudgetsurplusincreasesthesupplyofloanablefunds,reducesthe
44、interestrate,and stimulatesinvestment.8/26/202470IdentifyingUnemploymentCategoriesofUnemploymentTheproblemofunemploymentisusuallydividedintotwocategories.the long-run problem and the short-run problemthe long-run problem and the short-run problemnaturalunemploymentcyclicalunemployment8/26/202471 is
45、unemploymentthatdoesnotgoawayonitsowneveninthelongrun.Itistheamountofunemploymentthattheeconomynormallyexperiences.Natural Unemployment8/26/202472 referstotheyear-to-yearfluctuationsinunemploymentarounditsnaturalrate.Itisassociatedwithshort-termupsanddownsofthebusinesscycle.Cyclical Unemployment8/26
46、/202473Three Basic Questions:Three Basic Questions:Howdoesgovernmentmeasuretheeconomysrateofunemployment?Whatproblemsariseininterpretingtheunemploymentdata?Howlongaretheunemployedtypicallywithoutwork?DescribingUnemployment8/26/202474How is unemployment measured?Basedontheanswerstothesurveyquestions,
47、eachadultisplacedintooneofthreecategories:EmployedUnemployedNotinthelaborforce8/26/202475Apersonisconsideredasan adultifheorsheisover16yearsold.Apersonis employedifheorshehasspentmostofthepreviousweekworkingatapaidjob.Apersonisunemployed ifheorsheisontemporarylayoff,islookingforajob,oriswaitingforth
48、estartdateofanewjob.Apersonwhofitsneitherofthesecategories,suchasafull-timestudent,homemaker,orretiree,isnotinthelabor force.8/26/202476Thelabor force isthetotalnumberofworkers,includingboththeemployedandtheunemployed.8/26/202477Theunemployment rateunemployment rate iscalculatedasthepercentageofthel
49、aborforcethatisunemployed.8/26/202478The labor-force participation rate is the percentage of the adult population that is in the labor force.8/26/202479104.2105.2Employed 8.17.4Unemployed 169.5168.2Adult226.5223.6Population20112010Unit:millionsUnemploymentratelabor-force participation ratelabor-forc
50、e participation rate112.6Laborforce20112010112.366.9%66.3%6.6%7.2%labor-force participation ratelabor-force participation rate169.5112.38/26/202480Doestheunemploymentratemeasurewhatwewantitto?Itisdifficulttodistinguishbetweenapersonwhoisunemployedandapersonwhoisnotinthelaborforce.Discouraged workers
51、Discouraged workers,peoplewhowouldliketoworkbuthavegivenuplookingforjobsafteranunsuccessfulsearch,dontshowupinunemploymentstatistics.Otherpeoplemayclaimtobeunemployedinordertoreceivefinancialassistance,eventhoughtheyarentlookingforwork.8/26/202481Howlongaretheunemployedwithoutwork?Mostspellsofunempl
52、oymentareshort.Mostunemploymentobservedatanygiventimeislong-term.Mostoftheeconomysunemploymentproblemisattributabletorelativelyfewworkerswhoarejoblessforlongperiodsoftime.8/26/202482Whyaretherealwayssomepeopleunemployed?Inanideallabormarket,wageswouldadjusttobalancethesupplyanddemandforlabor,ensurin
53、gthatallworkerswouldbefullyemployed.Frictional unemploymentStructural unemployment8/26/202483Frictional unemployment .referstotheunemploymentthatresultsfromthetimethatittakestomatchworkerswithjobs.Inotherwords,ittakestimeforworkerstosearchforthejobsthatarebestsuittheirtastesandskills.8/26/202484JobS
54、earchZistheprocessbywhichworkersfindappropriatejobsgiventheirtastesandskills.Zresultsfromthefactthatittakestimeforqualifiedindividualstobematchedwithappropriatejobs.8/26/202485Thisunemploymentisdifferentfromtheothertypesofunemployment.Itisnotcausedbyawageratehigherthanequilibrium.Itiscausedbythetime
55、spentsearchingforthe“right”job.8/26/202486Whysomefrictionalunemploymentisinevitable?Searchunemploymentisinevitablebecausetheeconomyisalwayschanging.Changesinthecompositionofdemandamongindustriesorregionsarecalledsectoralshifts.Ittakestimeforworkerstosearchforandfindjobsinnewsectors.8/26/202487Public
56、PolicyandJobSearchGovernmentprogramscanaffectthetimeittakesunemployedworkerstofindnewjobs.Theseprogramsincludethefollowing:Government-runemploymentagenciesPublictrainingprogramsUnemploymentinsurance8/26/202488Government-runemploymentagenciesGovernment-runemploymentagenciesgiveoutinformationaboutjobv
57、acanciesinordertomatchworkersandjobsmorequickly.8/26/202489PublictrainingprogramsPublictrainingprogramsaimtoeasethetransitionofworkersfromdecliningtogrowingindustriesandtohelpdisadvantagedgroupsescapepoverty.8/26/202490isagovernmentprogramthatpartiallyprotectsworkersincomeswhentheybecomeunemployed.O
58、ffersworkerspartialprotectionagainstjoblosses.Offerspartialpaymentofformerwagesforalimitedtimetothosewhoarelaidoff.increasestheamountofsearchunemployment.Itreducesthesearcheffortsoftheunemployed.Itmayimprovethechancesofworkersbeingmatchedwiththerightjobs.Unemployment insurance8/26/202491Structural u
59、nemployment istheunemploymentthatresultsbecausethenumberofjobsavailableinsomelabormarketsisinsufficienttoprovideajobforeveryonewhowantsone.8/26/202492Structural unemploymentoccurswhenthequantityoflaborsuppliedexceedsthequantitydemanded.isoftenthoughttoexplainlongerspellsofunemployment.Whyistherestru
60、cturalunemployment?8/26/202493Minimum-wagelawsMarketpoweroflaborunionsEfficiencywagesWhyaresomeworkerswagessetabovethesetabovethelevellevelthatbringssupplyanddemandintoequilibrium?8/26/202494Whentheminimumwageissetabove thelevelthatbalancessupplyanddemand,itcreatesunemployment.8/26/202495QuantityofL
61、abor0Surplusoflabor=UnemploymentLaborsupplyLabordemandWageMinimumwageLDLSWELEunemploymentfromawageabovetheequilibriumlevel8/26/2024968/26/202497isaworkerassociationthatbargainswithemployersoverwagesandworkingconditions.isatypeofcartelattemptingtoexertitsmarketpower.Aunion8/26/202498willbeorganizedif
62、theunionandthefirmcannotreachanagreement.referstowhentheunionorganizesawithdrawaloflaborfromthefirm.makessomeworkersbetteroffandotherworkersworseoff.Astrike8/26/202499Theprocessbywhichunionsandfirmsagreeonthetermsofemploymentiscalledcollective bargaining.Byactingasacartelwithabilitytostrikeorotherwi
63、seimposehighcostsonemployers,unionsusuallyachieveabove-equilibriumwagesfortheirmembers.8/26/2024100Workersinunions(insiders)(insiders)getthebenefitsofcollectivebargaining,whileworkersnotintheunion(outsiders)(outsiders)bearsomeofthecosts.8/26/2024101Areunionsgood or badfortheeconomy?Criticsarguethatu
64、nionscausetheallocationoflabortobeinefficientandinequitable.Wagesabovethecompetitivelevelreducethequantityoflabordemandedandcauseunemployment.Someworkersbenefitattheexpenseofotherworkers.8/26/2024102Advocatesofunionscontendthatunionsareanecessaryantidotetothemarketpoweroffirmsthathireworkers.Theycla
65、imthatunionsareimportantforhelpingfirmsrespondefficientlytoworkersconcerns.8/26/2024103Efficiency wages areabove-equilibriumwagespaidbyfirmsinordertoincreaseworkerproductivity.Thetheoryofefficiencywagesstatesthatfirmsoperatemoreefficientlyifwagesareabovetheequilibriumlevel.8/26/2024104Afirmmayprefer
66、higherthanequilibriumwagesforthefollowingreasons:WorkerHealth:Betterpaidworkerseatabetterdietandthusaremoreproductive.WorkerTurnover:Ahigherpaidworkerislesslikelytolookforanotherjob.WorkerEffort:Higherwagesmotivateworkerstoputforwardtheirbesteffort.WorkerQuality:Higherwagesattractabetterpoolofworker
67、stoapplyforjobs.Afirmmaypreferhigherthanequilibriumwagesforthefollowingreasons:8/26/2024105The Economics of DiscriminationDiscrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristic
68、s.8/26/2024106Although discrimination is an emotionally charged topic, economists try to study the topic objectively in order to separate myth separate myth from reality.from reality.8/26/2024107Measuring Labor-Market DiscriminationDiscrimination is often measured by looking at the average wages of
69、different groups.Even in a labor market free of discrimination, different people have different wages.8/26/2024108People differ in the amount of human capital they have and in the kinds of work they are willing and able to do.8/26/2024109Because the differences in average wages among groups in part
70、reflect differences in human capital and job characteristics, they do not by themselves say anything about how much discrimination there is in the labor market.8/26/2024110Discrimination by EmployersFirms that do not discriminate will have lower labor costs when they hire the employees discriminated
71、 against.Nondiscriminatory firms will tend to replace firms that discriminate.8/26/2024111Competitive markets tend to limit the impact of discrimination on wages.Firms that do not discriminate will be more profitable than those firms that do discriminate.8/26/2024112Discrimination by Customers and G
72、overnmentsAlthough the profit motive is a strong force acting to eliminate discriminatory wage differentials, there are limits to its corrective abilities. CustomerpreferencesGovernmentpolicies8/26/2024113CustomerpreferencesIf customers have discriminatory preferences, a competitive market is consis
73、tent with a discriminatory wage differential. This will happen when customers are willing to pay to maintain the discriminatory practice.8/26/2024114GovernmentpoliciesWhen the government mandates discriminatory practices or requires firms to discriminate, this may also lead to discriminatory wage di
74、fferentials.8/26/2024115SummaryEconomic prosperity, as measured by real GDP per person, varies substantially around the world.The average income of the worlds richest countries is more than ten times that in the worlds poorest countries.The standard of living in an economy depends on the economys ab
75、ility to produce goods and services.8/26/2024116Productivity depends on the amounts of physical capital, human capital, natural resources, and technological knowledge available to workers.Government policies can influence the economys growth rate in many different ways.8/26/2024117The accumulation o
76、f capital is subject to diminishing returns.Because of diminishing returns, higher saving leads to a higher growth for a period of time, but growth will eventually slow down.Also because of diminishing returns, the return to capital is especially high in poor countries.8/26/2024118All financial inst
77、itutions ,such as the bond market, the stock market, banks, and mutual funds ,act to direct the resources of households who want to save some of their income into the hands of households and firms who want to borrow.8/26/2024119National income accounting identities reveal some important relationship
78、s among macroeconomic variables.In particular, in a closed economy, national saving must equal investment.Financial institutions attempt to match one persons saving with another persons investment.8/26/2024120The interest rate is determined by the supply and demand for loanable funds.The supply of l
79、oanable funds comes from households who want to save some of their income.The demand for loanable funds comes from households and firms who want to borrow for investment.8/26/2024121National saving equals private saving plus public saving.A government budget deficit represents negative public saving
80、 and, therefore, reduces national saving and the supply of loanable funds.When a government budget deficit crowds out investment, it reduces the growth of productivity and GDP.8/26/2024122The unemployment rate is the percentage of those who would like to work but dont have jobs.The unemployment rate
81、 is an imperfect measure of joblessness.Most unemployment observed at any given time is attributable to a few people who are unemployed for long periods of time.8/26/2024123One reason for unemployment is the time it takes for workers to search for jobs that best suit their tastes and skills.A second
82、 reason why our economy always has some unemployment is minimum-wage laws. Minimum-wage laws raise the quantity of labor supplied and reduce the quantity demanded.8/26/2024124A third reason for unemployment is the market power of unions.A fourth reason for unemployment is suggested by the theory of efficiency wages. High wages can improve worker health, lower worker turnover, increase worker effort, and raise worker quality.
