Chapter Eighteen: Intro -- Economic Growth and Productivity
Until now, we have focused almost exclusively on the short run--a period of time in which the economy deviates from potential output. In such instances, stabilization policy (monetary and fiscal policy) are effective tools to dampen recessions and restrain inflation.
We now turn our attention to the long run and we analyze how the economy grows through time. Long-run growth is key to rising living standards. An economy with a per capita income growth rate of just 2 percent per year can become enormously wealthy in just a few generations.
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