25.3 Causes and Effects of Economic Growth

MyEconLab Concept Video

You’ve seen that real GDP grows when labor productivity and the quantity of ­labor grow. You’ve also seen that labor productivity grows when saving and investment increase physical capital, when education and on-the-job training expand human capital, and when research leads to the discovery of new technologies. But what causes saving and investment in new capital, the expansion of human capital, the discovery of new technologies, and population growth? Economists have been trying to answer this question and understand why and how poor countries become rich and rich countries become richer since the time of Adam Smith in the eighteenth century. We’ll look at two sets of ideas: ...

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