Lecture 3

Lecture 3 - Econ 102 Fall 2006 Lecture 3 Equilibrium in a...

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1 Econ 102 Fall 2006 Lecture 3 Equilibrium in a one period model
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2 Points to Understand How employment is determined How the ratio of w to p is determined The model says nothing about p – it is a real model What is debt and what is equity What is profit
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3 Actors in the Economy Firms: Own capital, Hire labor Households: Own firms, Supply labor NB: No government in this example NB: No banks or financial intermediaries
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4 What is Capital Capital is a stock of factories and machines that can be used to produce commodities Additions to the stock of capital is called investment 20% of gdp goes to investment in the US 16% is private investment 4% is government investment
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5 A Simplification In most of this course we will study a simpler economy with no investment There are two reasons for investment To replace worn out capital (depreciation) To increase the stock of capital to allow for increased population (growth) In the example we will study here there is a fixed stock of machines that never wears out and there is no growth
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6 What happens in the period?
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This note was uploaded on 09/27/2009 for the course ECON 102 taught by Professor Serra during the Fall '08 term at UCLA.

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Lecture 3 - Econ 102 Fall 2006 Lecture 3 Equilibrium in a...

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