A country's standard of living depends on its productivity, which is determined by physical capital, human capital, natural resources, and technological knowledge. Productivity growth leads to long-term economic growth. While productivity growth rates vary over time and between countries, governments can influence growth through policies that encourage capital accumulation, education, trade, and technological advancement. These policies help determine a society's ability to produce goods and services into the future.

1. 9 THE REAL ECONOMY IN THE LONG RUN

2. 25 Production and Growth

7. Table 1 The Variety of Growth Experiences Copyright©2004 South-Western

28. Figure 1 Growth and Investment Copyright©2003 Southwestern/Thomson Learning ( a ) G r o w t h R a t e 1 9 6 0 – 1991 ( b ) I n v e s t m e n t 1 9 6 0 – 1991 South Korea Singapore Japan Israel Canada Brazil West Germany Mexico United Kingdom Nigeria United States India Bangladesh Chile Rwanda South Korea Singapore Japan Israel Canada Brazil West Germany Mexico United Kingdom Nigeria United States India Bangladesh Chile Rwanda Investment (percent of GDP) Growth Rate (percent) 0 1 2 3 4 5 6 7 0 10 20 30 40

43. Figure 2 The Growth in Real GDP Per Person Copyright©2003 Southwestern/Thomson Learning Growth Rate (percent per year) 1.0 1.5 2.0 2.5 3.0 3.5 4.0 1 8 7 0 – 1890 1 8 9 0 – 1910 1 9 1 0 – 1930 1 9 3 0 – 1950 1 9 5 0 – 1970 1 9 7 0 – 1990 1 9 9 0 – 2000 0