Chapter7LectureNotesSAK

Chapter7LectureNotesSAK - Intermediate Macroeconomics, 321...

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Unformatted text preview: Intermediate Macroeconomics, 321 Chapter 7 Growth Instructor Geoffrey Williams Rutgers University June 9, 2009 Instructor Geoffrey Williams Chapter 7 Outline Instructor Geoffrey Williams Chapter 7 Growth Theory IS the Solow Model The Solow Model is the workhorse of growth theory (and of a lot of other economic areas as well) Its very simple but very powerful Some of its predictions agree very well with the data, some dont There are a number of ideas and debates about what works, what doesnt, what needs to be done to improve the model Instructor Geoffrey Williams Chapter 7 Production We begin with a simple production function Y = F ( K , L ) As before, we assume constant returns to scale zY = F ( zK , zL ) It suits our purposes to normalize by the quantity of labor (the population) Y / L = F ( K / L , 1) This allows us to focus on production per capita, income per capita, etc Setting y = Y / L , k = K / L , we can write f ( k ) = F ( k , 1) y = f ( k ) Instructor Geoffrey Williams Chapter 7 What determines...
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Chapter7LectureNotesSAK - Intermediate Macroeconomics, 321...

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