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Learning outcomes:
Explain the importance of investment for economic
growth, referring to investment in physical capital, human
capital and natural capital.
Explain the importance of improved productivity for
economic growth.
Describe, using an LRAS diagram, economic growth as
an increase in potential output caused by factors including
increases in the quantity and quality of resources, leading
to a rightward shift of the LRAS curve.
Capital
Capital refers to resources that
can provide a future benefit to the
economy.
Three distinct categories of
Capital:
1. Physical Capital
2. Human Capital
3. Natural Capital
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Natural Capital
Land is everything below and on the
land including the eco-system.
Where Land does not change, Natural
Capital does due to investment and or
destruction of Land.
Destroyed: cutting down of the
rainforests, depleting fish
Improved: planting trees, investment in
technology with the aim of preserving the
Land.
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Type of Capital
Land
Labor
Physical
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