Macroeconomic Summary

Solow Growth miracles: low nifty-labor ratio; high savings cast; low population crop. Key concepts: 1. miserableer countries confirm higher suppuration potential than rich ones. This potential whitethorn or whitethorn non be realized. 2. Increasing savings (financial reform) has level effects. This may development income, but does not sustain festering. 3. Only engineering learning drives long-run growth. Without technological substitute, growth eventually stops. technology and change magnitude returns: countries ar always chasing their steady state; increase in productivity shifts the steady state to the right. technical schoolnology is corporeal in production: y=A*f(k). How is tech produced? proceed it from foreign; put friendshipable people together; labor/skills; fillips measuring tech growth: (use logs) 3 rules: g(AB)=g(A)+g(B); g(A/B)=g(A)-g(B) and g(A^b)=bxg(A). Cobb Douglas: y=A*K^alpha. Steady state with tech: g(k)=0 and g(y)=g(A), economy growth s on ly due to tech growth, but when this happens we neer reach the steady state the curve shifts up. Why? Tech doesnt have diminishing marginal returns; non-rival goods (all can use); friendship leaks. Poverty dugouts: increasing returns: the reward to doing an legal action increases as more(prenominal) of that activity is do. The trap: when miniature is done, there is slender bonus to do more.

Frequently traps arise because activities need to be done together. Examples: capital investment (without roads, cant manufacture and ship), wellness (increasing returns, poor health impoverishes people), inc ret on educa tion (when education levels are genuinely ! low, it takes lots of time and energy to teach canonic skills little human capital is acquired), investing in skills and equipment (inc ret, skills are not valued because they involve equipment that is unavailable equip is not worth(predicate) importing for lack of specialized workers). Poverty trap when you have low stock of capital there is little incentive to invest. The push theory: aid provides the critical citizenry to be given a poverty trap. Institutions...If you want to get a dependable essay, order it on our website: OrderCustomPaper.com

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