Unit 1 Flashcards
Labor Input
The total number of hours worked in the economy.
The Determinants of economic growth
Labor (N), Capital (K), and Technology (A)
Production Function
Balanced Growth Investment (I)
I= n x K
Occurs when Labor and Capital grow at the same rate
Output per Worker
Consumption Function
Income Identity
Autonomous Consumption
Disposable Income
Income-Spending Model w/o NX
Income-Spending Model w/ NX
Factor that shifts a spending.
- An increase (decrease) in net worth (assets - liabilities) causes a (autonomous consumption) to rise (fall).
Factors that shifts I spending (2)
Expectations of higher (lower) Y in the future increases (decreases) capital demand in the future, which causes I to rise (fall).
Lower (higher) interest rates decrease (increase) borrowing costs for investment goods so I rises (falls).
Factors that shift NX (2)
An increase (decrease) in foreign income causes X to rise (fall) because foreigners have more (less) money to spend on U.S. exports.
A lower (higher) exchange rate makes U.S. goods less (more) costly overseas and foreign goods more (less) costly in the U.S. so X rises (falls) and IM falls (rises).
A permanent increase in the amount of labor used in the production of technology will lead to a
A permanent increase in the growth rate of output but a temporary increase in labor supply growth.
In the long run, a decline in government spending’s share of output causes
Investment and government savings to rise and the nominal interest rate to fall.
GDP
The market value of all final goods and services produced within a country in a given year (or other specified time period).
Okun’s Law
In a market where firms operate according to the efficiency wage theory, we would expect that
the level of unemployment will be lower.
Money S/D and the Interest Rate Theory
Solow Model, explanation of long-run growth rate of capital = labor
Solow Model Graph
Growth Accounting Formula
delta%(Y) = delta%(A) + delta%(K)^(1/3) + delta%(N)^(2/3)
Income Spending Graph with Variable Net Exports
