ECON 200 Lecture Notes - Lecture 28: Production Function, Deflation, Technological Change
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2. 12: these small differences in growth rates may not look important but they are, rule of 70, with annual growth of x percent, the level of a variable doubles every 70/x years, example, 2% growth. The per-worker production function: the per-worker production function shows the relationship between capital per hour worked and real gdp per hour worked, holding other things constant. **inflation can cause the illusion of higher demand, but it does not necessarily create that demand. Long-term agreements become too risky for lenders, making it more difficult to obtain a loan. **when lenders cannot anticipate how much of their money will be returned, they are less likely to want to allow borrowers to take out loans. Prices begin to rise, so firms increase output. **if producers believe a price increase is due to a rise in demand, they will increase output.