Topic 8: Economic Growth 2 Flashcards
(21 cards)
What is the Solow Growth Model’s key assumption regarding the economy?
Closed economy with no government
The model assumes no government intervention in the economy.
What is the formula representing the constant savings rate in the Solow Growth Model?
S = sY
S is savings, s is the savings rate, and Y is output.
In the Solow Growth Model, what does Y = F(K, AN) represent?
Output as a function of capital and effective labor
K is capital, A is technology, and N is labor.
What happens to capital per effective worker in the short run due to a rise in technological progress?
Decreases
This is a short-term effect before long-term growth resumes.
What is the long-term effect of a rise in technological progress on output per worker?
Increases
Long-term growth is positively affected by technological progress.
List three limitations of the Solow Growth Model.
- No inequality
- No education/health
- No environment
These limitations suggest the model does not account for various social factors.
What was China’s GDP contribution to global GDP pre-1820?
32.4%
China was the world’s largest economy at that time.
What is the ‘Needham Puzzle’?
Why didn’t China industrialize earlier?
This question addresses the historical context of China’s economic development.
During the stagnation period (1820–1978), what happened to China’s GDP per capita?
Declined
The decline was influenced by wars and central planning inefficiencies.
What major reform occurred in China post-1978?
Reform and Opening Up under Deng Xiaoping
This marked a shift from state-controlled to non-state economic sectors.
What was the annual real GDP growth rate in China from 1980 to 2010?
10%
This period was characterized by significant economic reform and growth.
What was China’s GDP per capita percentage of the US by 2011?
25%
It increased from 5% in 1980.
What are the two dimensions of inequality discussed in relation to growth?
- Inter-generational
- Intra-generational
These dimensions highlight how different generations and socio-economic groups are affected by growth.
What does Sir Nicholas Stern identify as the largest market failure in history?
GHG emissions
This refers to the significant environmental impact of greenhouse gas emissions.
What are some effects of climate change mentioned?
- Rising sea levels
- Mass displacement
- Extreme weather
- Spread of diseases
- Unpredictable ‘tail risks’
These effects illustrate the serious consequences of climate change.
What are the four solutions proposed to address the climate crisis?
- Stop dirty tech growth
- Reverse dirty tech
- Shift to clean tech
- Shift to clean tech + replace dirty
Each solution has different implications for GDP growth and safety.
True or False: The optimistic perspective on climate solutions suggests that innovation alone will solve climate problems.
True
This view emphasizes the role of technology and policy in addressing climate issues.
What is the main critique of the critical perspective on economic growth?
Infinite growth is unsustainable
This perspective argues for a systemic change rather than mere market adjustments.
Fill in the blank: The modified tech growth formula in the context of the climate crisis is g_A = _____ g_{A, ext{dirty}} + (1 - eta) g_{A, ext{clean}}.
β
This formula captures the relationship between dirty and clean technological growth.
What correlation exists between CO₂ levels and global temperatures?
Strong correlation
Higher CO₂ levels are associated with rising global temperatures.
What is the primary conclusion of the summary regarding the Solow model?
It recapped the Solow model with technology and analyzed the climate crisis as a negative externality
This indicates the interaction between economic growth and environmental sustainability.
