merged

Percentage increase in per capita Real GDP
Country from 1970 to 2010
China 846%
India 290%
U.S. 102%
Indonesia 386%
Brazil 116%
Pakistan 139%
Other nations that achieved large increases in per capita Real GDP between 1970 and 2010
included Bhutan (275%), Botswana (599%), Bulgaria (273%), Cyprus (211%), Dominican
Republic (263%), Egypt (315%), Equatorial Guinea (1795%), Hong Kong (460%), Ireland (219%),
Laos (368%), Luxembourg (227%), Macao (755%), Malaysia (484%), Maldives (450%), Malta
(485%), Mauritius (398%), Oman (266%), Romania (218%), Singapore (674%), South Korea
(848%), Sri Lanka (363%), Taiwan (807%), Thailand (415%), and Vietnam (407%).
The economic growth led to decreasing world poverty. According to the World Bank, the
percentage of the developing world’s population living in extreme poverty (income of less than
$1.25 per day, 2005 base) fell from 52% in 1981 to 43% in 1990 and then to 21% in 2010. The
percentage living in extreme poverty in China fell from 26% in 2007 to 6% in 2012.
Economic Growth in the U.S.
The table below illustrates that the U.S. achieved both absolute economic growth and per capita
economic growth in every decade over the period from 1930 to 2010. The information is from the
Bureau of Economic Analysis.
Real GDP Population Per Capita Percentage
Year (Base Year 2009) (Rounded) Real GDP Increase
1930 $967 billion 123 million $7,847 X
1940 1,266 billion 132 million 9,583 22%
1950 2,184 billion 152 million 14,398 50%
1960 3,109 billion 181 million 17,198 19%
1970 4,722 billion 205 million 23,024 34%
1980 6,450 billion 228 million 28,325 23%
1990 8,955 billion 250 million 35,794 26%
2000 12,560 billion 282 million 44,475 24%
2010 14,784 billion 310 million 47,724 7%
Determinants of Economic Growth
Absolute economic growth is defined as an increase in Real GDP. A country may be able to
increase its Real GDP in the short run by moving from a point inside its production possibilities
frontier to a point on its production possibilities frontier. But in the long run, a country must shift its
production possibilities frontier outward (increase its productive capacity) in order to achieve
absolute economic growth. The factors that determine a country’s ability to increase its productive
capacity are the determinants of economic growth:
1. Natural resources. Having abundant natural resources is probably helpful to achieving
economic growth. U.S. economic growth has almost certainly been enhanced by the
abundance of fertile farmland, temperate weather, fossil fuels, minerals, etc. But some
countries with abundant natural resources (e.g. Nigeria) have achieved relatively little
economic growth. And some countries with few natural resources (e.g. Singapore) have
achieved a great deal of economic growth. Some economists argue that abundant natural
resources may be a hindrance to economic growth. See an appendix at the end of the chapter
for a discussion of “the resource curse”.
FOR REVIEW ONLY - NOT FOR DISTRIBUTION
Economic Growth 14 - 2