宏观经济学chap07-upload.pptVIP

Chapter 7 Economic Growth 1 In this chapter, you will learn… the closed economy Solow model how a country’s standard of living depends on its saving and population growth rates how to use the “Golden Rule” to find the optimal saving rate and capital stock Why growth matters Data on infant mortality rates: 20% in the poorest 1/5 of all countries 0.4% in the richest 1/5 In Pakistan, 85% of people live on less than $2/day. One-fourth of the poorest countries have had famines during the past 3 decades. Poverty is associated with oppression of women and minorities. Economic growth raises living standards and reduces poverty…. Income and poverty in the world selected countries, 2000 Why growth matters Anything that effects the long-run rate of economic growth – even by a tiny amount – will have huge effects on living standards in the long run. Why growth matters If the annual growth rate of U.S. real GDP per capita had been just one-tenth of one percent higher during the 1990s, the U.S. would have generated an additional $496 billion of income during that decade. The lessons of growth theory These lessons help us understand why poor countries are poor design policies that can help them grow learn how our own growth rate is affected by shocks and our government’s policies The Solow model due to Robert Solow,won Nobel Prize for contributions to the study of economic growth a major paradigm: widely used in policy making benchmark against which most recent growth theories are compared looks at the determinants of economic growth and the standard of living in the long run How Solow model is different from Chapter 3’s model 1. K is no longer fixed:investment causes it to grow, depreciation causes it to shrink 2. L is no longer fixed:population growth causes it to grow 3. the consumption function is simpler How Solow model is different from Chapter 3’s model 4. no G or T(only to simplify presentation; we can still do fiscal policy experiments) cosmetic differ