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Lecture 8

ECON 402 Lecture 8: Chapter 8.1Premium

2 pages69 viewsSpring 2019

Department
Economics
Course Code
ECON 402
Professor
Maciej Dudek
Lecture
8

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Chapter 8:
Economic Growth I
Overview:
1. Closed Economy Solow model
2. Country standard of living dependency its saving and population growth rates
3. Golden Rule and application
Growth Matters:
Infant mortality Rate:
1. 20% in the poorest 1/5 countries
2. 0.4 % in the richest 1/5 countries
25% of the poorest countries have had famines in the past 3 decades.
Poverty is also associated with oppression of woman and minorities.
In general. Economic growth raises living standards and reduce poverty.
Any small change in the long run growth rate, even by a tiny amount, will have a huge
effects on living standard in the long run.
The Solow model:
Build by Robert Solow
1. Widely used in policy making
2. Benchmark against which most recent growth theory.
3. Use determinants of growth and standard living in the long run
Difference with chapter 3 model:
1. K is not fixed anymore
2. L is not fixed
3. Simpler consumption function.
4. No G or T
5. Cosmetic differences
The production function:
Y = F(K,L)
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