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
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)
3
Q
determinants of labor productivity
A
- physical capital growth
- human capital growth
- technological advances
4
Q
- human capital
A
- knowledge and skills that workers acquire through education, training or experience
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,
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
7
Q
policies promoting economic growth
A
- increase human capital
- promote saving and investment
- support research and development
- improve the legal and political framework
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
9
Q
growth rates
A
- g-denotes annual growth
- t-1 = year
10
Q
physical capital
A
- workers are more productive if they have more tools or machines to work with
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
12
Q
total factor productivity
A
- 2ndary factors of production
- impact the ability to transform primary factors into output
- the solow residual
13
Q
economic growth has occured when…
A
- capital stock has grown
- labour supply has grown
