TOPIC 1 - intoduction Flashcards
what are dynamics and what are we most importantly interested in?
dynamics are the evolution over time of economic variables such as commodity price, real interest rate, capital/GDP etc. we are most importantly interested in the mechanisms responsible for the dynamics of the variables
what are dynamics stritcly related to?
the rate of change
what are the two types of rate of change?
it could be either instantaneous or average.
what is the distinction between the two rate of changes?
the distinction strictly depends on the time elapsing two consecutive economic activities or descisions which can be either: infinitely small such as continous time or it can be a natural or rational number ie discrete time
how can time be measured in physics?
periodic events and periodic motions have long served as standards for the units of time.
how is the international unit of time decided?
it is currently defined in terms of radiation emmitted by caesuim atoms
is time continous or discrete?
time is continous
how is dicrete time used in economics?
discrete time is often assumed because measurement of certain economic phenomena are taken at discrete intervals such as quartres, years etc
what is modelling?
modelling consists in providing a conceptual representation of a phenomena. this necessarily implies a degree of simplification
what is the evalutation on a model?
a model is good if it is consistent with empiracle evidence
what is the definition of a differential equation?
a differential equation is an equation where both a function and its derivative appears and the unknown is not a number but a function of the independent variable t
