Economics: Economic Growth

Question 1

Capital Deepening (economics)

Answer 1

1. An increase in the capital to labor ratio.
2. More foriegn investment can drive this.
3. Moves economy further along the productivity curve

Question 2

GDP Growth Rate attributable to Total Factor Productivity

Answer 2

GDP = ΔTFP + α(LT growth rate in capital) + [(1-α)(LT growth rate in labor)]

- α: 1 - (labor cost/total factor cost)

Question 3

Problem Predicted by Classical Economic Model (dismal)

Answer 3

Technology will not lead to individual wealth because it will increase population growth until only subsistence is possible.

Wrong because….

1. Technology correlated with slowing population growth
2. Technologies growth greater than population growth

Question 4

Exogenous Economic Growth Models Predict…

Answer 4

Technological advances will benefit multiple sectors of the economy as new investments are made within and across companies.