ECO100Y5 Lecture Notes - Lecture 26: Potential Output, Shortage, Capital Accumulation
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ECO100Y5 Full Course Notes
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Addressing poverty and income inequality without necessarily redistributing existing wealth. Forgone consumption - economic growth, which promises more goods and services tomorrow, is achieved by consuming fewer goods today. The process of economic growth renders some machines and skill sets to be obselete. Sources of economic growth: growth in the labour force, growth in human capital - the sets of skills workers acquire through formal education and on-the-job training, growth in physical capital [e. g. factories, machines, electronic equipment, technological improvement. Private saving = real gdp (y*) - taxes net of transfers (t) - desired consumption (c) Public saving = taxes net of transfers (t) - government purchases (g) National saving = (y* - t - c) + (t - g) = y* - c - g. For a given level of real gdp in the long run (y*), an increase in household consumption or government purchases must imply a reduction in national saving.
