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Principles of Economics 3e

Key Terms

Principles of Economics 3eKey Terms
aggregate production function
the process whereby an economy as a whole turns economic inputs such as human capital, physical capital, and technology into output measured as GDP per capita
capital deepening
an increase by society in the average level of physical and/or human capital per person
compound growth rate
the rate of growth when multiplied by a base that includes past GDP growth
contractual rights
the rights of individuals to enter into agreements with others regarding the use of their property providing recourse through the legal system in the event of noncompliance
convergence
pattern in which economies with low per capita incomes grow faster than economies with high per capita incomes
human capital
the accumulated skills and education of workers
Industrial Revolution
the widespread use of power-driven machinery and the economic and social changes that occurred in the first half of the 1800s
infrastructure
a component of physical capital such as roads and rail systems
innovation
putting advances in knowledge to use in a new product or service
invention
advances in knowledge
labor productivity
the value of what is produced per worker, or per hour worked (sometimes called worker productivity)
modern economic growth
the period of rapid economic growth from 1870 onward
physical capital
the plant and equipment that firms use in production; this includes infrastructure
production function
the process whereby a firm turns economic inputs like labor, machinery, and raw materials into outputs like goods and services that consumers use
rule of law
the process of enacting laws that protect individual and entity rights to use their property as they see fit. Laws must be clear, public, fair, and enforced, and applicable to all members of society
special economic zone (SEZ)
area of a country, usually with access to a port where, among other benefits, the government does not tax trade
technological change
a combination of invention—advances in knowledge—and innovation
technology
all the ways in which existing inputs produce more or higher quality, as well as different and altogether new products
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