ECON 002 Lecture Notes - Lecture 13: Capital Accumulation, Diminishing Returns, Autarky
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Econ-002: macro economics lecture 13 solow growth model part 1. Solow model win the nobel in 1987 last multiple choice of the next midterm. Y = c + i + g + nx (represent demand side of economy) Y (gdp) = c + i (assume no government expenditure and it is a closed economy) Structural characteristics (what is given): production function (represent supply side of economy, savings rate for the economy: s, population growth rate: n, depreciation rate of capital: d. Purpose: analyze changes in economy over time. Solving the model: expressing the model in per capita terms. Adopt the convention: (lower case represent per capita: k/l = k, y/l = y. This equation tells us that the only thing can influence productivity only depends on technology a, capital a, physical capital per person k. Exponential function diminishing marginal returns of physical capital per person. We are trying to define physical capital per person.