chapter 9 Flashcards
what does E denote?
the effectiveness of labour
how does an increase in effectiveness of labour how much more effective can workers operate at?
double, they are able to produce double
how can you determine the number of effective workers?
E x L
what rate does the effectiveness of workers grow at?
g
what does āgā denote?
rate of labour - augmented technological progress
how much does population grow at?
n
what does n denote?
the growth rate of the population/ L
what is the output per effective worker?
y= Y/ LxE
what is capital per effective worker?
k=K/ LxE
what is the steady state condition when there is growth of effective worker and growth of population?
i= (depreciation+n+g)k
how much does y grow by?
it grows by n+g, since Y/L= y x E and E grows by g and L grows by n
how much does c grow by?
it grows by n+g, since C/L= c x E x L and E grows by g and L grows by n
how much does i grow by?
it grows by n+g, since I/L = i x E x L since E grows by g and L grows by n
what is total output now that we are taking in to account effective workers?
Y= y x E x L
in the solow growth model, what is the persistent growth in standard living?
Y/L, but it is accounted for by technological progress
what is the golden rule steady state when there are effective workers accounted for?
when consumption is maximized for effective worker
what does c equal in a golden rule steady state?
c= f(k) - (depreciation+n+g) k
what is the formula when c per effective worker is maximized?
MPK- depreciation= n+g
if n+g = 0.3
if MPK= 0.11
depreciation= 0.033
are we in the golden rule steady state?
MPK- depreciation= n+g
0.11-0.033=0.03
0.0767= 0.03
MPK- depreciation > n+g
this means that the capital, y and consumption are less than the golden rule steady state
how can changes in taxes impact savings?
it can change how people save but now how much people save
