Lecture 3 - Economic Growth

Flashcards about Economic Growth.

Figure:

Global GDP per capita over time.

Y

The total output of an economy.

P

The size of the population.

y = Y/P

A measure of average income or output per person.

Technological progress

Improvements in technology or knowledge that enhance productivity.

g = (Yt+1 - Yt) / Yt = ΔY / Yt

The rate of growth of a variable Y between time t and t+1.

ln(1 + g) ≈ g

The approximate growth rate when g is small.

Yt = Y0(1 + g)t

GDP per capita in year t.

ln(Yt) = ln(Y0) + t * ln(1 + g)

A formula to Calculate by how much a variable has grown between two dates

ln(1 + g) ≈ g

A way to determine average or exponential growth rate.

Figure:

GDP per capita 1870-2010, selected countries.

d/dt ln[y(t)] = 1/y(t) * dy(t)/dt ≈ Δy/y

growth rate of y(t).

Harrod-Domar model

Economic model focused on the role of savings and investment in economic growth