Savings and Capital Formation Flashcards
1
Q
Savings Rate
A
Savings as a proportion of income
2
Q
Flow Variables
A
Measured per unit of time – eg. GDP, consumption investment and savings per year
3
Q
Stock Variables
A
Measured at a point in time – eg. value of assets, liabilities and wealth
4
Q
Net Capital Accumulation
On Formula Sheet
A
Kt+1 – Kt = It – δKt
- Kt is the amount of physical capital (utilised by firms to generate output, such as equipment and production plant) at time period t
- It is investment/expenditure on capital at time period t
- δ is the depreciation rate per unit of time
5
Q
Shocks to Savings and Investment
A
- Ageing population → decrease savings
- Technological advancements → increase investment
