Chaoter 3 - Physical Capital

Question 1

Capital

Answer 1

• machines, buildings, infrastructure etc
• more or better capital = more output
• In 2017 USworker had $394,492 worth and in Bangladesh it was $34,419

Question 2

5 characteristics of capital

Answer 2

1. It is productive
2. It is produced
   3 its use is limited
3. It can earn a return
4. It wears out

Question 3

Accumulation of capital

Answer 3

Governed by 2 forces:
- invest,ment
-Depreciation

Question 4

Rise and fall of capital

Answer 4

-prior to 19th century most imprints. FoP was land
- capital replaced land in importance due to changes in technology and shift in composition

Question 5

Steady states

Answer 5

Countries will move towards their steady states but will not necessarily have reached steady states

Question 6

Solow model 3 predictions

Answer 6

• if 2 countries have same rate of investment but diff levels of income, country with lower income will have higher growth
• if 2 countries have same level of income but diff rates of investment the. Country with higher rate of investment will have higher growth
• a country that raises its level of investment will experience an increase in rate of income growth

Question 7

Explaining saving rate (endogenous)

Answer 7

savings are endogenous:
- fundamental determinants of economic growth
- saving might be affected by income itself

Question 8

National savings rate

Answer 8

• private saving and govt saving