Catch Up
Catching-up growth is growth caused primarily by this.
What is capital accumulation?
Output that is saved and invested rather than consumed, contributes to future productivity through _______.
What is new capital formation (ɣ)?
gamma
Cutting edge growth is growth caused primarily by this.
New ideas, innovations, new technical knowledge.
The simple Solow model predicts that the U.S. will see zero economic growth over the long run. While g has fallen it is still above 2%. We can thank what for this?
What are ideas, innovation, and technological progress.
Y = F(K) =
sqrt K
is an example of
A production function.
Poorer countries have naturally higher growth rates. Richer countries have naturally lower growth rates. This creates what economists call ______________.
What is conditional convergence?
The capital that wears out.
What is depreciation?
In the United States, about _______ % of scientists work for private firms
70
Governments should play a role in encouraging new ideas because new ideas provide this benefit.
What are idea spillovers?
The increase in output due to an additional unit of physical capital (e.g., a new fry machine at Chick-fil-a)
Marginal Product of Capital
In the two decades following World War II the growth rates of GDP per capita in Japan and Germany were _________ relative to their current growth rates.
Higher. Why?
When the capital stock is static (i.e., neither increasing nor decreasing) economists refer to this as.
What is the steady state?
Given Y = A*F(K), an increase in A results in _________ in the steady-state level of capital.
an increase.
_____________ is a government grant of temporary monopoly rights
A Patent
An increase in an economy's investment rate (ceteris paribus), will ______ the steady state level of capital.
Increase.
As a country accumulates more capital the growth rate in GDP per capita decreases because of ______ _______ ______ __ _______.
Diminishing marginal product of capital
When investment exceeds depreciation the capital stock will ___________ .
What is increase?
Because ideas are freely shared due to spillovers, ideas will be __________.
under provided
Ideas for increasing output are primarily researched, developed and implemented by _____________
Profit-seeking firms
Each year an economy depreciates units of capital (K) at a rate of 0.02, but invests in
0.1 sqrtK
units of capital.
The steady state level of capital is ______ units.
25.
The reasons China's economic growth will likely slow down include the falling marginal product of capital prediction of the Solow Model and the lack of _________.
good institutions.
When Investment = Depreciation, every unit of investment is being used to replace depreciated capital. We call this point _____________.
Steady state level of capital.
Robert Solow determined that better ideas were responsible for roughly _________ of the standard of living in the U.S.
3/4's
A good is _________ if one person's consumption of the good does not limit another person's consumption.
Nonrival
Each year an economy depreciates units of capital (K) at a rate of 0.02, but invests in
0.2sqrtK
units of capital.
The steady state level of capital is ______ units.
100