ECON1102 Study Guide - Final Guide: Ceteris Paribus, Capital Accumulation, Diminishing Returns
Document Summary
Economic growth - growth in total (national) real economic output. Change in y between period t and t + 1: (yt+1 - yt)/yt. Maximising growth: one could posit the problem of maximising gdp growth subject to particular resource constraints, we could say y = f(k,l). Subject to k , l, where the "bars" above the inputs indicate some fixed amount. Thus, we have net investment which equals investment less depreciation: labour: we assert that the amount of labour in the economy remains exogenous and constant at: Investment: meanwhile, total investment equals a constant investment rate times total output: Summary of key relationships: real output per hour worked (y/l) and capital per hour worked (k/l) with a given technology determining the shape of the curve (trade-offs between the two). Formally speaking, diminishing returns occur because of the specification used for the production function in the growth model. Total amounts of k and l are important to a nation"s gdp.
