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ECON 105 (187)
Lecture 8

# Lecture 8 - Growth

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School
Simon Fraser University
Department
Economics
Course
ECON 105
Professor
Eldar Sehic
Semester
Summer

Description
Growth Increase in Y Real GDP Growth Rate (g) g = (Ynew – YoldY old General Growth: Y = N (1 n g) N – n N: Future year n: Starting year Example: Suppose N = 2013 and n = 2012 2013 – 2012 Y 2013= Y20121 + g) 1 Y 2013= Y20121 + g) Y 2013= Y2012+ Y2013g (Y 2013- 2012)/ 2012= g Example: Suppose there are two economies (A and B) with the same starting GDP (Y ), but n economy A’s growth rate is 1% and economy B’s growth rate is 2%. When will GDP of economy B be twice the GDP of economy A? B A Y N 2 Y N B B N – n A A N – n B A Y n1 + g ) = Y n1 + g ) → Y = n n ↓ B N – n A N – n (1 + g ) = 2(1 + g ) ← ← N – n N – n (1.02) = 2(1.01) T T (1.02) = 2(1.01) T ln1.02 = ln2 + T ln1.01 T[ln1.02 – ln1.01] = ln 2 T = ln2/(ln1.02 – 1.01) ≈ 70 years Average Standard of Living (ASL) Commonly used measure is income-per-capita (income-per-person) Such as GDP-per-capita ASL = GDP/Population ASL Growth Rate = GDP Growth Rate – Pop. Growth Rate (ASLGR = GDPGR – POPGR) Long-Run Growth Increase in Y* Occurs in the very long-run Causes of LR Growth: Factor Supply (F): Labour (L) Human Capital (HK) Physical Capital (PK) Technology (Productivity) Sources of LR Growth: Investment, Discovery, Spill Overs…(know
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