Lecture 7 - Population Growth in the Solow Model Flashcards Preview

Macroeconomics (Economics Cambridge Part I) > Lecture 7 - Population Growth in the Solow Model > Flashcards

Flashcards in Lecture 7 - Population Growth in the Solow Model Deck (9)
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1
Q

An increase in the depreciation rate has what effect on the value of the steady state?

A

it causes the capital stock to grow toward a lower steady state

2
Q

What does an increase in the depreciation rate look like graphically on an investment vs k graph?

A

a rotation upwards, so a larger gradient

3
Q

What does an increase in the saving rate do investment?

A

an increase in the saving rate raises investment

4
Q

What does an increasing in the saving rate do to the value of the steady state?

A
  • increase in the saving rate raises investment
  • causing the capital stock to grow toward a higher steady state
5
Q

What does an increase in the saving rate look like graphically on an investment vs k graph?

A

an outward ‘rotation’ about the origin

6
Q

Show why, according to the Solow model, why higher s leads to higher y*?

A
  • higher s –> higher k*
  • since y = f(k)
  • higher k* –> higher y*
7
Q

The Solow model predicts that countries with higher rates of saving and investment will have higher levels of ______ and _________ in the long run

A

higher levels of capital and income per worker in the long run

8
Q

Why according to the Solow model, does saving and investment not sustain perpetual long-run growth

A

due to diminishing returns

9
Q

What does ΔK equal in aggregate terms?

A

ΔK = sF(K,L) - 𝛿K