Macroeconomics 6 Economic Growth I
- What causes the differences in income over time and across countries?
- In lecture 2, identified the factors of production—capital and labor—and the production technology as the sources of the economy’s output and, thus, of its total income
- Differences in income, then, must come from differences in capital, labor, and technology.
- Our primary task in the lecture is to develop Solow Growth Model to understand economic growth in the very long run.
- In lecture 2, we describe how the economy produces and uses its output at one point in time. But we broaden our analysis over time in the lecture.
- The Solow growth model shows how saving, population growth, and technological progress affect the level of an economy’s output and its growth over time
- Solow model: Economic growth = capital stock + population growth + technological progress