5 Steps to a 5 AP Macroeconomics 2019

134 ❯ Step 4. Review the Knowledge You Need to Score High

county income tax. Meanwhile, programs like education, law enforcement, and transporta-

tion have seen cutbacks to help offset lost federal funds.

So, in summary:

•   State and local governments that are sometimes required by law to balance their budgets

can thwart federal fiscal policy.

10.3 Economic Growth and Productivity

Main Topics: Production Possibilities, Productivity, Determinants of Productivity,

Supply-Side Policies

Production Possibilities

Way back in Chapter 5, the topic of the PPC (or PPF) was introduced, and that chapter

illustrated how the frontier can move outward over time. This simple graphical technique

can be extremely useful and adaptable to seeing how growth can be impacted by govern-

ment policy. Before we move on to policy, here is a quick refresher course in economic

growth and productivity.

KEY IDEA

Electric Cars

Digital Cameras

Figure 10.8

Figure 10.8 shows that this nation’s production possibilities in electric cars and digital

cameras can grow over time if

1. the quantity of economic resources increases,


2. the quality of those resources improves, and/or


3. the nation’s technology improves.

Productivity

The factors that shift a PPC outward over time make a lot of sense, but what they all

have in common is that each has the potential to represent increased productivity.

Productivity is typically described as measuring the quantity of output that can be pro-

duced per worker in a given amount of time. If a nation’s labor force can produce more

output per worker from one year to the next, we say that productivity has increased and

the nation’s PPC has shifted outward.