Lecture 5

Question 1

Rule of 70

Answer 1

Takes 70 years for growth rate of 1% to double; at 2% growth rate, it takes 35 years to double

Question 2

Equation for rule of 70

Answer 2

(1+ inflation rate)^T

Question 3

Solow Growth Method Assumptions

Answer 3

Constant Population (L=1)
Time Flows Discretely
Capital is a factor of Production (ex: factory, table, robots)
The economy is endowed with initial level of capital stock (every country may have different starting point)

Question 4

Solow Growth Method Saving Behavior

Answer 4

Constant Saving Rate (less than 1 greater than 0) -> U.S. is 10%
Saving=Investment