Unformatted text preview: nding why some countries are so rich while some others are so poor is one of the Soojin Kim (Purdue) most important,
Macroeconomics perhaps the most important, challenges facing social science. It is important / 28
4 Why growth matters Growth Rate Matters... Anything that effects the long-run rate of economic
a LOT, the long-run!!
growth – even by a tinyinamount – will have huge
effects on living standards in the long run. annual
growth rate of
capita …25 years …50 years …100 years 2.0% 64.0% 169.2% 624.5% 2.5% 85.4% 243.7% 1,081.4% CHAPTER 8 increase in standard
of living after… Economic Growth I Soojin Kim (Purdue) 5 Macroeconomics Spring 2014 5 / 28 The Solow Model
due to Robert Solow, the winner of 1987 Nobel Prize Soojin Kim (Purdue) Macroeconomics Spring 2014 6 / 28 Key Model Ingredients • K is no longer ﬁxed!
• K increases with investment.
• K decreases with depreciation. • L is no longer ﬁxed!
• L increases with population...
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- Spring '14
- Macroeconomics, Purdue University, Soojin Kim