week 4 Flashcards

1
Q

understanding growth rates

A
  • rule of 70

- > variable grows at x% a year, then it will take approximately 70/x years for variable to double

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2
Q

sources of economic growth

A
  • real gdp can only grow if labour productivty grows

(y/n)

or the share of working population grows

(n/pop)

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3
Q

determinants of labor productivity

A
  • physical capital growth
  • human capital growth
  • technological advances
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4
Q
  • human capital
A
  • knowledge and skills that workers acquire through education, training or experience
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5
Q
  • horizontal innovation model
A
  • technological progress shows up as an expansion of the number of varieties of products
  • eg. opening up of new industries, steam-engine,
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6
Q

institutions

A
  • fundamental cause of long-run growth
  • structure of property rights and the presence and perfection of markets
  • no property rights = no incentive to invest in capital
  • allocate resources to the most efficient uses
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7
Q

policies promoting economic growth

A
  • increase human capital
  • promote saving and investment
  • support research and development
  • improve the legal and political framework
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8
Q

production function approach

A
  • how much is produced at Yt, at time t, given capital (Kt), and labour (Lt).
  • secondary factors of production are assumed to be constant A
  • diminishing returns
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9
Q

growth rates

A
  • g-denotes annual growth

- t-1 = year

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10
Q

physical capital

A
  • workers are more productive if they have more tools or machines to work with
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11
Q

capital and diminishing marginal returns

A
  • for a given # of workers, more capital means increae in total output and labor productivity
  • more capital, smaller gain of adding extra capital
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12
Q

total factor productivity

A
  • 2ndary factors of production
  • impact the ability to transform primary factors into output
  • the solow residual
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13
Q

economic growth has occured when…

A
  • capital stock has grown

- labour supply has grown

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