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

# The change in kn from 1 investment depreciation

• 51

This preview shows pages 45–48. Sign up to view the full content.

The change in K/N from 1. Investment depreciation positive 2. Depreciatio depreciation negative Steady state capital and ou Steady state capital = p no longer changing i.e investment – deprec Where investment per (function intersect) The Savings Rate and Outpu What is the effect of the 1. The savin because m year to year depends on two factors: t per worker : if investment per worker ex n per worker, the change in capital per wor on per worker : If investment per worker i n per worker then the change in capital per The difference bet is S utput point were capital per worker and output p ciation = 0 worker S(K/N)= depreciation per worker ut e savings rate on growth rate of output per ngs rate has no effect on the LR out put of w it is equal to zero xceeds the rker is is less than er worker is tween B and C per worker are δ(N/K) r worker? worker

This preview has intentionally blurred sections. Sign up to view the full version.

2. Nonethe worker i higher sa long run 3. An increa output p - Assume no technologic The Savings Rate and Consu The savings rate = S(K/N) Government can affect the 1. Changin savings a 2. Affect pr The question what saving Need to change the focus Consider two scenarios: 1. Savings r 2. Savings r because p the LR Conclusi Therefore there must b steady state level of con Golden rule level of cap that results in the high eless, the saving rate determines the level o in the long run. Other things equal, countrie aving rate will achieve higher output per w ase in the saving rate will lead to higher gr per worker for some time, but not forever. The savings rate increases growth but ev effect wears when the economy reaches state level out output per worker cal process umption ) + (T-G) e savings rate: ng public savings : budget surplus increase and budget deficits decreases aggregate sav rivate savings gs rate should the government ask for? to consumption rate is 0 capital = 0 output = 0 cons rate is 1 capital and output will be very h people save all their income the consumpti ion: consumption = 0 when s = 0 S = 1 be an optimum value between 0<S>1 that m nsumption pital = the level of capital at the value of the hest level of consumption in the steady state of output per es with a worker in the rowth of ventually this s its steady es aggregate vings sumption = 0 high but ion is zero in maximizes e savings rate e
In order for government t make a trade off between Welfare issue Physical vs. Human Capital Human capital = the se The greater the skills, t NB decreasing return t The production functio An increase in how in the form of human steady state human which leads to an per worker. In the LR output depen physical capital and als Endogenous Models of endogenous technological change Output per worker (Y/ and human capital per CHAPTER 12: TECHNOL GROWTH Technological progress and to get close to the golden rule level of capit consumption today vs. consumption tomo et of skills of workers in an economy the greater the productivity

This preview has intentionally blurred sections. Sign up to view the full version.

This is the end of the preview. Sign up to access the rest of the document.
• Fall '11
• ENikolaidou

{[ snackBarMessage ]}

### What students are saying

• 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.

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

• 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.

Dana University of Pennsylvania ‘17, Course Hero Intern

• 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.

Jill Tulane University ‘16, Course Hero Intern