Chapter 46
Growth and Waste
LEARNING OBJECTIVES
Explain the role of savings and investment on growth in capitalist economies.
Explain the role of technology and productivity on growth in capitalist economies.
Discuss conservative policies for growth derived from the two key sources of growth.
OUTLINE OF CHAPTER
I. How the American Economy Grows
II. Facts of the U.S. Growth Rate
The Golden Age of American Capitalism, 1950-1970
Slow Growth of the U.S. Economy, 1970-2001
III. Growth and Waste under Capitalism
Military Production and Waste
IV. Summary
KEY TERMS
average propensity to save
outsourcing
rate of growth
ANSWERS TO END OF CHAPTER REVIEW QUESTIONS
Explain the role of savings and investment on growth in capitalist economies.
1. law say will happen with savings?
2. Why is investment important to economic growth? Can there be growth without
investment? Explain.
Investment increases the amount of capital. Output (economic growth) depends on inputs
Explain the role of technology and productivity on growth in capitalist economies.
3. Why is productivity important for growth? What happens if productivity falls?
amount of resources).
4. How are technology and productivity related?
Discuss conservative policies for growth derived from the two key sources of growth.
5. What policies would conservatives argue help increase savings? Investment?
Overall savings could be increased by lowering taxes on those who do save
6. What would conservatives recommend to encourage technological breakthroughs?
Describe the progressive critique of conservative policies for growth.
7. How would progressive economists view conservative policies on savings and
investment? Explain.
Progressives do not accept that increasing savings will automatically be used to
Summarize patterns of growth and the explanations for the patterns of growth in recent
U.S. history.
8. Since World War II, what two decades had the highest growth rates? What three
decades had lower growth rates? What were some of the factors leading to lower
growth rates?
The highest rates of growth occurred during the 1950s and 1960s. Lower growth rates
Explain problems associated with growth in the United States.
9. List the types of waste in the economy described in this chapter. Which ones do you
disagree with (if any), and why?
Military spending produces high profits for corporations that produce for the military
Nuclear waste and other types of pollution may be regarded as waste.
10. Describe one type of waste in detail and explain why it occurs.
11. Does high growth of GDP always lead to high growth of employee compensation,
middle-class income, and income of the poor?
High military spending will lead to inflation unless peacetime production is reduced. If
APPENDIX 46.1
Population and Growth
LEARNING OBJECTIVE FOR APPENDIX 46.1
Explain why Malthus made predictions of mass starvation and why it has not always
OUTLINE OF APPENDIX
ANSWERS TO APPENDIX 46.1 REVIEW QUESTIONS
Explain why Malthus made predictions of mass starvation and why it has not always
happened in developed economies.
1. What did Malthus assume about increasing production? Why?
Malthus assumed that food production grows more slowly than the population. Malthus
2. What is relationship of increasing production and population growth? Why would this be
a problem?
3. Why have developed countries not experienced mass starvation as their populations
grew? Explain.
The dismal predictions of Malthus did not account for increasing productivity. Evidence