Principles of Macroeconomics / Unit 4 MAC 0308 short lesson, about 20 seconds
The Aggregate Production Function
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The idea
The aggregate production function relates the economy's inputs to its output. Adding more of one input while the others are fixed raises output, but by less with each addition.
In practice
That is diminishing marginal returns: each extra worker has less capital to work with.
Where people slip
Better technology shifts the whole function upward, which is how growth escapes diminishing returns.
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