ECON-2006EG Study Guide - Quiz Guide: Production Function, Isoquant, Danish Krone
7 Mar 2021
School
Department
Course
Professor
Document Summary
Investments (i: population (l, capital (k) new investment in factories, machinery, equipment, roads, infrastructure, total output (y), total income. Standard growth models have at their core a production function (chapter 3). Aggregate production functions to describes the relation between the country"s l and y (economywide relationships). F = output is a function of k and l. Y = total income s = average savings. L = change in l n = growth rate of the population. The exact form of the function f is what distinguishes many different models of growth. Show what proportion of the gdp is put away for saving and hence, re-investment. Usually s is 20-25%, countries rich from natural resources save around 50%, whereas really poor countries can only afford 5%. All money in the world will be consumed at one point, either consumption or investment. We don"t consider that there might be fdi, borrowing, surpluses, aid, remittances.
