Chap 2 economic growth Flashcards
What does the Hockey cross graph represent?
IR and the huge increasing in GDP per capita
Def the production function and give its characteritics
prod function= how output Y is produced using inputs (L and A)
- increasing
- concave
What implies decreasing returns principle in terms of production?
- average prod. decreasing
- marginal prod decreasing.
Why decreasing returns?
Increasing an input in the production process (all else equal) lowers its productivity. FARMERS EXEMPLE
Describe the Malthusian model and the Malthusian trap.
- if consumption above sub. level, pop grow
=> Population growth dilutes any increase in living standards. MALTHUSIAN TRAP - if cons. under sub. level, pop. decrease.
How to escape the Malthusian trap?
Rapid tech. growth. (faster than pop growth)
What does the Cobb-Douglass function measure and what is it?
The efficiency of capital/tech association.
𝑨.𝑲𝜶.𝑳𝟏-𝜶 ou 𝒚=𝑨𝒌𝜶 avec 𝜶 part du capital dans la production.
Capital accumulation formula?
𝑲𝒕*𝟏 =𝑲𝒕 +𝑰𝒕 −𝜹𝑲𝒕 or 𝒌𝒕”𝟏−𝒌𝒕=𝒔𝑨𝒌𝜶𝒕 −𝜹𝒌𝒕
Why according to the Sollow model long term growth is = 0?
Capital production reach a steady state because investment has diminishing returns.
Why according to the Sollow model long term growth is = 0?
Capital production reaches a steady state because investment has diminishing returns + depreciation = still capital stock and growth rate is 0.
What implies convergence(sollow model)? x3
- LONG-TERM GROWTH CAN’T BE EXPLAINED BY CAPITAL ACCUMULATION=> tech. progress.
- Saving rate doesn’t affect the growth rate but is related to the level of GDP per capita (and capita accumulation)
- The Sollow model expects poor countries to catch up with the rich countries.
What is the contribution of each variable in production?
gY= gA + 1/3 gK + 2/3 gL
Comment expliquer les différences de richesses entre pays aux mêmes caractéristiques ?
différence de TFP, dans la productivité totale des facteurs de production.
