ECO2004S Summary that will change everything! (1).pdf

To capital still holds even with human capi on that

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to capital still holds (even with human capi on that takes human capital into account is much s capital capital increas nds only on how much society saves and inv so human capital growth = models that generate growth wit /N) is dependent on physical capital per wo worker (H/N) LOGICAL PROGRESS AND THE RAT the production function tal they have to orrow ital) s written as: society saves l (H) increase per worker se in output vest in thout orker (K/N) TE OF
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Improved technology h 1. Larger q 2. Better p 3. New pro 4. A larger Technological progress The production functio A is exogenous Technological progress amount a given amoun Technological progress Decreasing return to ca Interactions and Capital Apply and S as we did before, The equation for the re is: had many dimensions quantities of output produced in less time products oducts r variety of products s has a positive effect on output per worker on with technology is given by: s reduces the number of workers needed to nt of output needed s increases the amount of effective labour apital and effective labour still hold bet the prin , however now everything is per effective l equired amount of investment for capital to r o achieve the ween Output same nciples about I labour o be constant
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Depreciation: - Before K was co worker - Now we have te in order to keep to AN G a = the rate of technol G N = the of population g is constant) The growth rate of effe i.e. if technological prog now we get the investm Positive upward slopin Make the distinction be investment (blue line) onstant when investment per labour = depr echnological progress so as A increases AN p K/AN constant the increase in K must be logical progress growth (assume proportion of employed to ective labour AN = g A + g N ogress is growing at 2% and N is growing at ment needed for a constant level of capital ng line, just at depreciation line was before etween requires investment (pink line) and reciation per N increases. So proportional o population t 1%, AN = 3% e d actual
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Dynamics of Capital and Ou Interpreting the graph At B decreasing return investment per effectiv Output per effective wo increase as long as inve worker is greater than (K/AN) * where req investment, is the stead economy Output and capital grow + G N Also called the state of phenomenon) - Output a worker a Effects of an increase in the Changes in the saving r stead state growth rat effect the level of stead utput in the LR n to capital and ve worker set in orker will only estment per effective required investment quired investment = dy state point of the wth in steady state = G A balanced growth (LR and capital per effective are constant e Savings Rate rate doesn’t effect the te of output, but it does dy state output
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- T r - T 2. The Apro - I l - P Growth Accounting Growth accounting = th growth rate in K, N, A growth rate output = ΔY/Y Given the production function Y=AF(KN) Determinants Technological TP is the Spending
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