24 2017 faculty of economics and business Technology and the steady

24 2017 faculty of economics and business technology

This preview shows page 24 - 32 out of 32 pages.

24
Image of page 24

Subscribe to view the full document.

| Date 09-01-2017 faculty of economics and business Technology and the steady state (3) In the long run, capital per effective worker reaches a constant level, and so does output per effective worker. This implies that output ( Y ) is growing at the same rate as effective labour ( AN ). 25
Image of page 25
| Date 09-01-2017 faculty of economics and business Technology and sustainable growth In the steady state, output ( Y ) grows at the same rate as effective labour ( AN ); effective labour grows at a rate ( g A + g N ); Therefore, output growth in steady state equals ( g A + g N ). The growth rate of output is independent of the saving rate. Because output, capital and effective labor all grow at the same rate, ( g A + g N ), the steady state of the economy is also called a state of balanced growth. 26
Image of page 26

Subscribe to view the full document.

| Date 09-01-2017 faculty of economics and business Growth rates in the economy 27 Table 13.1 The characteristics of balanced growth Rate of growth of: 1 Capital per effective worker 0 2 Output per effective worker 0 3 Capital per worker g A 4 Output per worker g A 5 Labour g N 6 Capital g A + g N 7 Output g A + g N
Image of page 27
| Date 09-01-2017 faculty of economics and business The effect of saving (1) 28
Image of page 28

Subscribe to view the full document.

| Date 09-01-2017 faculty of economics and business The effect of saving (2) 29
Image of page 29
| Date 09-01-2017 faculty of economics and business The Golden Rule The Golden rule capital stock is that steady state for which consumption per (here: effective) worker is maximized: 30 Marginal product of capital C AN Y AN S AN F K AN ( g A g N ) K AN max C : C AN K AN F ' K AN ( g A g N ) 0
Image of page 30

Subscribe to view the full document.

| Date 09-01-2017 faculty of economics and business Summary The Solow model with technological progress shows us that economic growth in the long run can be sustainable. Policy aimed at technology can result in additional growth in the steady state. Keep constant rate of technological progress Increase the rate of technological progress Policy aimed at increasing saving only has temporary growth effects 31
Image of page 31
| Date 09-01-2017 faculty of economics and business Final thoughts 32 We have now completed the 1st macro-course! Given the learning objectives, check if you are able to….. 1. explain and discuss basic macroeconomic concepts. 2. work with aggregate open- and closed macroeconomic models. 3. distinguish between short-run, medium-run and long- run macroeconomic analysis. 4. apply the method of comparative statics using graphs and simple linear mathematical models. Next year, we continue with: international macroeconomics.
Image of page 32
  • Fall '17
  • Economics, 2 K, 1 K, 0 k, dr. R.M. Jong-A-Pin

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes