Sept26EGIII

Sept26EGIII - Economic Growth ( continued ) Monday,...

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Unformatted text preview: Economic Growth ( continued ) Monday, September 26, 2005 Announcements Questions, Comments, or Concerns Outline for Today: Productivity Motivations What is it Qs OH are M 4-5; Robinson Hall So Far Investment Rates ( ), Population Growth Rates ( n ) and Depreciation Rates ( ) have determined: 1. How the economys capital stock (as measured in per worker terms) evolves over time 2. How the income will evolve over time So then, where is economic growth coming from? Possible Answers All economies are currently converging to the steady state and very few are actually in it? Economies are growing just at the rate of population implying GDP is growing but not GDP per capita? Economics is just a load of !&$# ? Were leaving out something? Lets Use A Simple Model 1. Use the equation of motion for k 2. Take out any deletorious effect on capital accumulation; namely consider that capital never depreciates and that population does not growth ( n+ = 0) 3. Investment is a constant fraction of income 4. What will happen to capital and output over time? Solving the Simple Model Equations Capital grows but because the MPK falls over time, income stops growing ( ) ( ) lim 1 = = = = = = k k Ak k k A k k Ak k k f k k & & & The point Even without any deletorious effect on...
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This note was uploaded on 07/06/2009 for the course ECON 1210 taught by Professor Howitt during the Fall '08 term at Brown.

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Sept26EGIII - Economic Growth ( continued ) Monday,...

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