Recommended
More Related Content
More from Gale Pooley
More from Gale Pooley (20)
Recently uploaded
Recently uploaded (20)
Ed6
- 3. Questions?
- 7. How much do you make? Output Does it change over time? Growth Growth Models
- 8. Innovation Organizing capitals in more valuable ways
- 10. Output Output =Y Capital = K Function of your capitals Y = F(K)
- 11. Growth Change in Output ∆Y Growth = g g = ∆Y ÷Y
- 13. Tree Capital K Fruit Output Y Relationship Ratio v= $100 = $25= 4 K vY= 100 4 25=
- 14. Output = Capital Constant Y = K v Harrod-Domar Growth Model
- 15. The v constant is very important v indicates productivity smaller the v the greater productivity Harrod-Domar Growth Model
- 16. Harrod-Domar Growth Model Y = K v v = K Y K = Yv 25 = 100 4 4 = 100 25 100 =25 x 4
- 17. If you want more outputY? Cannot change v Increase Capital K K vY= 100 4 25=
- 18. Change in Output? Change Output = Change in Capital ÷ v K vY= Total Output ∆K v∆Y= Rate of Change = ∆Y ÷Y = Growth Rate = g ∆K v∆Y Y Y g = = = ∆K Yv
- 19. K vY =Total Output Rate of Change ∆K Yvg =
- 20. Trees get old and die Depreciation d Loss in Capital eachYear d x K or dK
- 21. Income Y Savings S Investment I = S = sY S = I =
- 22. Change in Capital = Investment - Depreciation ∆K = I - (dK) ∆K = sY - dK Depreciate Investment
- 24. g = s v - d growth = Harrod-Domar Growth Model savings - depreciation constant
- 26. Harrod-Domar Growth Model Y = K v g = (s/v) - d
- 27. g = (s/v) - d deprecation = d = 5% savings = s = 24% incremental capital output ratio = ICOR = v = 3 g = (24%/3) - 5% g = 3%
- 29. Just add capital and output increases Harrod-Domar Growth Model
- 30. Problems Assumes saving is sufficient Not all investments are positive Fixed v - no flexibility Harrod-Domar Growth Model