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UGA - ECON 2105 - Class Notes - Chapters 12 and 13 Notes

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UGA - ECON 2105 - Class Notes - Chapters 12 and 13 Notes

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background image Created By: Rachel Moore    Not for redistribution.     ECON 2105 March 23, 2016 – March 30, 2016 Chapter 12
You’re fired! activity
8 “workers” try to get ping-pong balls from one box to the other.

Workers TP  MP 1 16 16 2 14 -2 3 13 -1 4 16 3 5 14 -2 6 13 -1 7 12 -1 8 4 -8 Production Functions:
𝑞 = 𝑓(𝐾, 𝐿) K = capital L = labor

Aggregate Production Function:
𝑅𝑒𝑎𝑙 𝐺𝐷𝑃 = 𝑓(𝐾, 𝐿, 𝑁𝑎𝑡. 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑠) - Large stocks of capital, labor, or N.R. à Inc. Real
- What does adding one more unit of K add to Real
𝑀𝑎𝑟𝑔𝑖𝑛𝑎𝑙 𝑃𝑟𝑜𝑑𝑢𝑐𝑡 = 𝑀𝑃 ! = ∆𝑄
  Diminishing Marginal Product à MP falls as input
(K) increases; total product (TP) can still be (+).

For labor (K fixed) 0-L* à increasing MP (+) *L-L^ à decreasing MP (+) L^ – infinity à decreasing MP (-)
background image Created By: Rachel Moore    Not for redistribution.     Convergence: “steady state;” theory was that every country in the world was going
to become like the United States.
-  Is this what we observe in the world? NO!
-  Why? Invention; change in technology.

- What happens to investment? (I)
People want to invest more. - What happens in the loanable funds market? People want to borrow more. - What happens to per capita GDP? We’re better off; per capita GDP increases because of increased productivity.

Technology à Å
Increase technology à Ä
𝑅𝑒𝑎𝑙 𝐺𝐷𝑃  =  Åƒ(𝐾, 𝐿, 𝑁𝑅)
K à increases
Increase in education level (all workers; K fixed)
1. Education increases
What happens to the marginal product of
the last worker hired? Increases; makes
them more valuable.

2. MP
L à increases 3. What do firms do? Hire more labor (L).
4. D
L shifts right 5. W increases
6. Real GDP increases because more can be

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School: University of Georgia
Department: Economics
Course: Macroeconomics
Professor: McWhite
Term: Summer 2015
Tags: ECON2105, McWhite, Macroeconomics, Chapter 13, and Chapter12
Name: Chapters 12 and 13 Notes
Description: These notes cover chapters 12 and 13 which was discussed in class March 23 - April 1.
Uploaded: 04/18/2016
5 Pages 45 Views 36 Unlocks
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