ECO362H1 Midterm: chapter review up to midterm
Document Summary
Use price of a standard basket in each country. Chapter 3 solow: y = ak from: y=ak l1- . If two countries have same rate of investment, but different incomes, the country with the lower income will grow faster. Similarly, with same incomes but different investment rates, the country with higher investment will grow faster. A country that raises rate of investment will experience an increase in rate of income growth. Saving, or rate of investment, can rely on income. A country with higher income can afford to save more, thereby increasing income growth. Malthusian model; two graphs; labour force (down- shows labour at given income) and labour growth (up- shows income at given labour growth rate) versus income per capita. A change in the growth rate of the labour force will produce a new steady state level for labour (positive). A change in the labour level has no effect on the growth rate at a given level of income.
