Savings, Capital Accumulation And Output Flashcards
How does capital accumulation affect growth
It increases output but does not lead to sustained growth.
What are the twi relations between output and capital
Capital determines production and production determines savings and thus capital accumulation
What is the functional relation between capital per worker and output per worker
Y/N=f(K/N,1)
The effect if increased capital per worker decreases
What is the relationship between investment, the savings rate and production
I=s*Y
By what function does capital change through time
K(t+1)=(1-d)*K(t)+I(t)
d for depreciation rate, amount of capital that breaks down during the time period
What is the relationship between growth and capital accumulation expressed as a function
(K(t+1)-K(t))/N = (sY(t)-dK(t))/N
the difference in capital between periods is equal to the savings rate times production minus depreciation aka what you kept from the harvest
What is the steady state of capital per worker
sf(K/N) = dK/N
The state at which capital does not accumulate as it is depreciated at the rate at which it is raised. It is the minimum savings rate that the economy needs to sustain itself
Y(steady)/N = f(K(steady)/N) steady
Ehat is stalinist growth
Unsustainable growth through higher and higher capital accumulation over time without technological progress
Why is the plato of the output per capital per worker not generate the most efficient,
Because at that point depreciation catches up with output from capital accumulation
Why does sustained increased capital accumulation not lead to sustained economic growth
Because the growth per capital decreases with increased capital while depreciation remains linear. At some point the capital becomes to much to maintain for the labor
How can governments increase saving
They can work towards a budget surplus increasing public savings and they can give tax breaks to people who save to increase private savings
Why can increased savings lower consumption even in the long run
Because what is saved is not consumed and lower consumption lowers production which lowers the amount that can be saved but people who are optimistic consume more and more saving gives hope
What is the golden rule level of capital
The savings rate that leads to the maximum consumption per worker
What is the production function equations
Y/N = sqrt(K/N)
What is the difference and implications of a gully funded and pay as you go retirement system.
All retirement systems decrease private savings but the funded saves for them while pay as you go just gives out the money and thus decreases savings and thus output
What is the equation describing the evolution of output over time
K(t+1)/N-K(t)/N=ssqrt(K(t)/N))-dK(t)/N
What is the equation for steady production per worker
Y*/N=s/d
What can led to higher steady state output per worker
Decreased depreciation rate and increased savings rate
What is the equation for steady state consumption per worker
C/N=Y/N-dK/N = s(1-s)/d
What is meant by people suffering from hyperbolic discounting
That people have a tendency to not save enough and procrastinate saving. They want an apple today rather than an apple tomorrow but are indifferent between an apple tomorrow and an apple in a week
What is save more tomortow
A nudge policy to get people to save more by deciding to do so beforehand which is less psychologically taxing than deciding to save immediately
What is human capital
The skill of the workers
Does human capital lead to the same development in output as normal capital
Yes, a little education leads to a strong improvement while further is marginal. In the end the cost of educating becomes larger than the gain from it
Wy do people want to achieve the stable stare when it comes to capital
Because ti is at that rate that capital per worker is maxed although not necessarily consumption which is in the golden ratio
What ate models that generate steady growth without technological progress
Endogenous growth models
How does population growth affect the output per person
It is incorporated in the depreciation that becomes larger is then called required growth because it is no longer just machines breaking but a smaller share of a pie that must grow for people to not go without less
