ECON 295 Chapter Notes - Chapter 26: Loanable Funds, Tidal Power, Diminishing Returns
5 Dec 2017
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Sustained s in y* are a more powerful method of ing material living standards than the removal of recessionary gaps (recall: no paradox of thrift in lr) Even small differences in annual growth rates can result in significant (large) s in living. Standards after many years (recall: rule of 72) **note: difference b/w gdp, per capita gdp, gdp/worker & relevance for stan of l. Figure 26. 1 here you see actual impact of economic growth. **note: real gdp/capita grown more than real gdp/worker, b/c greater proportion of population is working. Benefits of economic growth: rising average living standards. & new production techniques: ex: some ppl get hurt" in the transition from ppl-operation production lines to computer- operated production lines. Different theories emphasize different sources of growth. We focus on the lr when real gdp is equal to potential output, y* Let the interest rate be determined endogenously by desired saving & desired investment (at y*)
