02 The role of capital. The Solow model Flashcards
1
Q
Relationship between Capital per worker vs GDP per worker
A
log/log
2
Q
Economic properties of capital:
A
- It increases labor productivity: more capital leads to higher output.
- Not a fixed factor (as opposed to natural resources).
- A rival good (as opposed to ideas).
- An excludable good.
- Yields a return.
- Depreciates over time.
3
Q
Agricultural land as a fraction of total wealth in the UK (1688-1958):
A
4
Q
In a closed economy, _____ = domestic investment.
A
In a closed economy, domestic savings = domestic investment.
5
Q
Constant retunrs to scale
A
6
Q
The production function is homogeneous of degree n if
A
F (zK,zL) = znF (K,L)
7
Q
Cobb-Douglas production function
A
Y = AKαL1−α
with 0 < α < 1
8
Q
Given Cobb-Douglas, α is _____ in national income.
A
Given Cobb-Douglas, α is the share of payments to capital in national income.
9
Q
State state in solow model (figure)
A
10
Q
More investment/saving -> higher output and capital per capita.
A
More investment/saving -> higher output and capital per capita.
