Macroeconomics
the world works. When an economy develops new technology, the approach to producing goods and services changes in a way that increases output per unit of input. Technological advancements, such as the steam engine, internal combustion engine, and computers, signifcantly impact productivity. New technologies can have spillover effects, improving productivity across various industries and sectors. Newscientifcknowledgeandtechnologicaladvancementshavethepotentialtobringaboutsignifcant improvements in living standards. Here's how technology leads to higher productivity, stimulating economic growth and improving the standard of living: 1. Sometechnicalinnovationsthattakeplaceare incorporatedintoexistingphysicalcapital. This improves the quality of the economy’s capital stock over time. An increase in the quality of capital can also increase labor productivity or the output for the same amount of labor . Sincebothphysicalandhumancapitalarekeydeterminantsofproductivity,anincreaseintheir quality will improve overall productivity thus contributing to higher economic growth. For instance,fastercomputerchipsthatareincorporatedintoexistingmachinesincreasetheoutput producedpermachineandmaketheworkofthepersonoperatingthemachinemucheasier,thus increasing their productivity too.
2. Insomesituations,higherlevelsofoutputcanbe achievedovertimeevenifthequantityandquality of labor and capitaldonotchange.Thishappens when technical innovations or changes are not directly embodied to labor and capital but work instead to allow producers to get more out of both. These include operational improvements like better production processes and manufacturing or inventory management systems.
In summary, technological advances lead to permanent increases in productivity reflected by an outward shift of the economy’s PPC and a rightward shift of its LRAS curve, signaling economic growth. Research and Development (R&D) New technologies cannot be created without research and development (R&D) .
R&Dreferstothesystematicinvestigation,experimentation, andinnovationprocessesaimedatcreatingnewknowledge, products, or technologies, or improving existing ones. It involvesactivitiesthatcontributetoadvancingscientifcand technological understanding, often with the goal of enhancing products, processes, or services.
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