If a country takes 46 years to double what is the average annual growth rate 46

# If a country takes 46 years to double what is the

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1.If a country takes 46 years to double what is the average annual growth rate? 46 = 70/r -> r= 1.52% 2. Examples: Rule of 70: Labor productivity: the quantity of goods and services that can be produced by one hour of work Q = quantity of output in a country L = quantity of hours worked LP = Q/L Labor Productivity: An increase in LP means with the same amount of workers, a country Changes to the production process (technology) will increase labor productivity Increases in Labor Productivity: Notes from class Lesson 7 Page 41
An increase in LP means with the same amount of workers, a country can produce more Physical capital: manufactured goods that are used to produce other goods and services Capital stock (of a country): the total amount of physical capital available in a country Human capital: the accumulated knowledge and skills workers acquire from education, training and their life experiences Referred to as institutions -> idea of efficient economy Rule of law and private property rights: additional requirement for economic growth Solid institutions create an atmosphere needed to foster economic growth Economic growth also depends on the ability of firms to expand their operations Financial Market: markets where financial securities such as stocks and bonds are bought and sold Financial intermediaries: are banks, mutual funds, pension funds and insurance companies that borrow funds from savers and lend them to borrowers Financial system is key because it connects savers with borrowers If firms had to do all the legwork it would be impossible to get enough funding to expand operations Thus we need the financial system to work as efficiently as possible to help the economy grow The Financial System: Know: Y= C + I + G [closed economy no NX] Therefore I= Y - C - G Saving = Investment: Interest rate = price of money How do we know how much firms have to pay for borrowing funds? Market for loanable funds: interaction of borrowers and lenders that determines the market interest rate and the quantity of loanable funds exchanged This market of supply and demand will determine the interest rate at which firms will be able to borrow The Market of Loanable Funds: The demand size of the market consists of firms Firms want funds to be able to make an investment A higher interest rate will lead to less quantity of loanable funds demanded as it will cost more to get the money The Demand for Loanable Funds: Lesson 7 Page 42
The supply side of the market consists of household and the government Households and the government may have extra money lying around so why not lend it and get paid A lower interest rate will lead to less quantity of loanable funds supplied as people will not get paid as much The Supply for Loanable Funds: At equilibrium in the loanable funds market when an interest rate creates the same amount of funds supplied as demanded No shortage or surplus Equilibrium of Loanable Funds: Solow Growth Model: will include the per-worker production function and

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