MacroeconomicsLesson 1 of 3 in the course Economic Growth

Modern Economic Growth, Global Divergence, and Growth-Supporting Institutions

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

This lesson explains why sustained economic growth is a relatively recent experience, what conditions preceded it, and how the Industrial Revolution began to change production and living standards.

For centuries, economies could rise above subsistence, and rulers or nobles could enjoy great wealth. Yet the average person’s standard of living changed little over long periods. Economic progress was slow and could be reversed by epidemics, disasters, weak governance, and limited technological or institutional development.

All flashcards

What is economic divergence?
A widening gap in income or output between economies.
What is catch-up growth?
Rapid growth that helps a lower-income economy narrow its gap with more-developed economies.
What are property rights?
Rights to own property and use it as the owner sees fit.
What are contractual rights?
Rights to make agreements and seek legal recourse when another party does not comply.
How can profits support a reinforcing growth cycle?
Profits can fund further investment and invention, creating additional opportunities for profit.

Quiz questions

  1. Before modern economic growth, how did the average person's standard of living generally change over long periods?Answer: It changed little over many centuries.
  2. How did the GDP-per-capita ratio between the 17 most-developed economies and the world's poorest economies change from 1870 to 1960?Answer: It increased from about 2.4 to about 4.2.
  3. Which pattern describes India's per-capita growth rates in the periods noted?Answer: About 4% in the 1990s, rising toward 7% to 8% in the 2000s and 2010s.
  4. What does the rule of law require?Answer: Laws that are clear, public, fair, enforced, and applied equally.
  5. Why might unreliable contract enforcement slow economic activity?Answer: People may avoid agreements, especially when services are delivered before payment.

Based on Principles of Economics 3e by Steven A. Greenlaw, David Shapiro, Daniel MacDonald (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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