ECON 295 Lecture 9: Macro Lecture 9
23 Mar 2017
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Macro lecture 9 chapter 26: long-run economic growth. Sustained increases in y* are a more powerful method of raising material living standards than the removal of recessionary gaps. Even small differences in annual growth rates can result in large changes in living standards after many years. Consider gdp, per capita gdp and gdp per worker. Exercise: suppose the economy jumps from path 1 to path 2 in year 0 because its rate of capital accumulation increases. What is the opportunity cost in this economy for this increase in capital accumulation: show the break even" point for the economy after the change described. The four fundamental sources of economic growth are: growth in the labour force, growth in human capital, growth in physical capital, technological improvement. Using the equilibrium condition in the simplest short-run macro model we get: Y c = i or s= i. Investment increases in the stock of capital leads to increases in the future level of y*
