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Econ 2010 Class Notes, week Feb 21-27

by: Graham Kliewer

Econ 2010 Class Notes, week Feb 21-27 ECON 2010

Marketplace > University of Memphis > Economcs > ECON 2010 > Econ 2010 Class Notes week Feb 21 27
Graham Kliewer
University of Memphis
GPA 4.0
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About this Document

These notes cover this week's class lectures.
Intro to Macroeconomics
Prof. Jamin Speer
Class Notes




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This 7 page Class Notes was uploaded by Graham Kliewer on Tuesday February 23, 2016. The Class Notes belongs to ECON 2010 at University of Memphis taught by Prof. Jamin Speer in Winter 2016. Since its upload, it has received 35 views. For similar materials see Intro to Macroeconomics in Economcs at University of Memphis.

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Date Created: 02/23/16
Class 2/23/2016 7.2 How does a nation's economy grow? Today: more about this process Thurs: why Return to Y=A*F(K,H) If you want econ to grow, increase one or more of these variables. Three ways to increase GDP Increasing its stock of physical cap., K Increasing the total efficiency units of labor, H Improving its tech. A You could also increase natural resources, but there isn't really a way to do that Math stuff No gov, no trade G=X=M=0 GDP, Y, then is just C+I Expenditure Savings is whatever's left over that I didn't consume Investment as a country is dependent on how much people save because banks loan your money to businesses Consumption brings immediate happiness, while saving leads to future consumption and thus future happiness. If we want to get richer in the future, we have to invest. For the individual consumption-saving decision, the relevant price is the interest rate. How much we are being paid for helping out the economy. Saving rate is sum of all these individual decisions to save. Saving rate = Total saving / GDP Savings rate is percentage of how much GDP we save. If everyone saves 10%, savings rate will be 10% Saving is important because it leads to growth in the economy. Physical capital accumulation by itself cannot generate sustained growth due to the diminishing of marginal product of physical cap. More cap will generate smaller and smaller increases of GDP Sustained growth cannot be done just by increasing capital. Won't work if we only increase human cap too. Technology Unlike K and H, Tech can generate sustained economic growth. Exponential Growth Constant rate of increase. New innovations and tech build on the existing stock of knowledge. It builds on itself. Why are we so much richer than our grandparents? Mostly because of growth in tech 7.3 Economic History Premodern times: up to 1800 Industrial Revolution: 1800 to 1820 Post Industrial Revolution: 1820 to present Thomas Malthus: Writing in 1798 when there is no econ growth. Said there will be no econ growth. Destined to live at the subsistence level: the minimum level of income to survive. Malthusian Cycle: if income per capita went up, the fertility rate went up. Income and population are inversely related n IPC Two big things changed to make him wrong. Industrial Revolution: Introduction of new machines and new means of production Started in UK, and spread to US in maybe the mid-1800s Demographic Transition: Move from big families to small families. B/c people move from rural agriculture to urban manufacturing. The Industrial rev was the beginning of major tech growth. The post revolution period has experienced sustained growth in income per capita due to dramatic innovations. GDP per capita is a measure of the average living standard of a nation but not the income of all individuals in that nation We therefore must look at the income inequality of a nation. Econ growth is not a guarantee of declining poverty.


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