14.02 Lecture Notes - Lecture 2: Big Mac Index, Per Capita Income, Purchasing Power Parity
Document Summary
Two countries, per capita income k in year 0. Country 1 grows at 6% per year for 25 years, country 2 grows at 2% Per capita income in year 25: . 8 in country 1, . 8 in country 2. A method for estimating an investment"s doubling time. Use some prices to value bundle of goods in many countries. Problem: goods consumed in some countries are impossible to others. You can buy a big mac virtually anywhere. Convert the price of the burger into us dollars. You can create a big mac exchange rate. Different from the stipulated exchange rate on the market. Shorthand for relating inputs and outputs in aggregate economy. How do we aggregate different types and qualities of capital goods and labor income. Often assume exponential decay where i = gross investment. Depreciation in values vs. depreciation in productive capacity. Growth accounting usually focuses on the number of persons.
