Teil 4 Flashcards
1
Q
Marginal Product of Captial
A
MPK > 0
- MPK is always positive
- If we build up more capital, we are able to produce more
- But DIMINISHING MPK
- Value of each additional Capital is decreasing
2
Q
Capital Accumulation Function
A
Kt+1 = It + (1-D)*Kt
3
Q
Gross Investment
A
It = s * Yt
4
Q
National Savings
A
S=SPVT
Y = C + I
=> S=SPVT= I
Any Domestic Saving is used to fund domestic Investment
Annahmen:
- SGOV = 0
- CA = 0
5
Q
Consumption Function
A
C = Y - (s*Y)
6
Q
Steady State Level
A
-> Long Run Level of Output
- Steady State Leven of Physcial Kapital, K*, depends on
- saving rate
- depreciaton rate
- share of capital
7
Q
Key Predictions of SIMPLE Solow Groth Model
A
- NO long run growth
- Capital Accumulation is a TEMPORARY source of growth
- stops growing as soon as we reach steady state
- Catch-Up Effect:
- Conditional on same production technology and saving rate
- poorer countries will catch up with richer countries
- Key Mechanisem: Diminshing MPK
- Countrys that have a diffrent saving rate,… have a diffrent steady state
- Simple Solow Model is simply saying that every country converges to STEADY STATE
- If you have nothing to start out with, you won’t get to steady state
- Stock of Physical Capital will always remain equalt to zero
8
Q
Simple Solow Growth Model
A
No increase in population growth and no increase in technological progress
9
Q
THE Solow Growth Model
A
- with population growth
- and with technological progress
10
Q
Steady State for Y, K, I, C
A
Steady State does NOT EXIST
- Both A & L are growing
11
Q
Steady State for per effective worker
A
Exists!!!
12
Q
Key Predictions of THE Solow Growth Model
A
- Catch Up of Poor Economie
- relative Catch Up in per effective worker steady state if model paramters are the same
- NO ABSOLUT Catch up in standards of living nor Output whenever diffrent inital conditions
- Growht Predictions
- per Worker quantities growht by g
- total output grows by g + n
