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Department
Economics
Course
Economics 2152A/B
Professor
Ayoub Yousefi
Semester
Fall

Description
Chapter 6 Neo-Classic Growth Model, Solow Model Government Policies to raise long run living standards: 1. Policies to affect the saving rate Although theories predict that saving increases in response to the “expected real return” (S = f(r)) most studies find this response to be small. An alternative to this is a more direct way in which government saves more. (S = prt S gov 2. Policies to raise the rate of productivity growth (∆A/A) Unlike the classical economic growth model which assumes ∆A/A as exogenous, the “new growth” models consider “endogenous productivity growth model” Endogenous growth theory explains productivity growth within the model. In other words, Productivity growth can be explained due to the following: - Improvement in infrastructure - Building human capital (knowledge, skills, training, etc.) - Encouraging research and development (R&D) by firms Rich economies: - Human capital - R&D
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