Week 4 Flashcards
What happens when population growth takes place show it graphically.
Old steady state is where (n1+d)k* intersects szf(k). Results in k decreasing from k1 to k2
This means more of savings goes into replenishing the loss in k due to people growing at a faster rate.
Depreciation works in same way.
Show graphically a one time technological improvement and what happens
What is technological progress?
Given a level of capital and labour input, it results in an increase in output. An increase in z basically shifts the function F up.
What are the 3 types of technological progress?
- Labour augmenting
- Capital augmenting
- Neutral
What type of technological progress allows for a long term growth.
Labour augmenting
How does a labour augmented productivity function notation look like and elaborate on the variables.
A is the rate at which you augment workers. A could be thought as the productivity of workers.
Y = F(K,AN)
How do we assume A?
We assume A is technology. We assume it grows at a constant rate A’t+1’ = A’t’(1+g)
How do we look at capital per efficiency worker and show the derivation.
Instead of dividing by N we divide by AN
How are the goods and capital markets cleared when looking at technological progress
How do we derive the law of motion of k(tilde) and what does the equation say?
capital per efficiency worker tmrw LHS is how much you loose today to depreciation RHS v.s. how much you save RHS
show the labour augmented solow model using the law of motion of k(tilde)
What happens to k(tilde) if actual investment is greater than break even investment
k(tilde) increases
What happens to k(tilde) if actual investment is less than break even investment
k(tilde) decreases
In steady state of labour augmented solow model how are each of the variables moving?
What are kaldor facts of economic growth
