New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Week 6 notes for Macro

by: Bradley Notetaker

Week 6 notes for Macro 22260

Marketplace > University of Memphis > Economcs > 22260 > Week 6 notes for Macro
Bradley Notetaker
University of Memphis
GPA 3.75

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

These notes cover chapters 7 and 8
Intro to Macroeconomics
Class Notes
25 ?




Popular in Intro to Macroeconomics

Popular in Economcs

This 5 page Class Notes was uploaded by Bradley Notetaker on Sunday February 28, 2016. The Class Notes belongs to 22260 at University of Memphis taught by Speer in Winter 2016. Since its upload, it has received 25 views. For similar materials see Intro to Macroeconomics in Economcs at University of Memphis.

Similar to 22260 at University of Memphis


Reviews for Week 6 notes for Macro


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 02/28/16
Chapter 7  2­23­16 A nation can increase its GDP by: 1) Increasing its stock of physical capital, K 2) Increasing the total efficiency units of labor, H 3) Improving its tech., A  Consider a simple economy where there is no government nor exports of imports… so  G=X=M=O  Therefore, on the expenditure side, Y=C+I  Y=C+I=C+S…. I=S  Aggregate saving (S)  How much we save as a country  Consumption brings immediate happiness, while saving leads to future  consumption and thus future happiness  For the individual consumption­saving decision, the relevant price is the interest rate  The sum total of these individual decisions determine the saving rate of the  economy:  Saving rate= total saving/GDP  Physical capital accumulation by itself cannot generate sustained growth due to the  diminishing marginal product of phusical capital  More and more capital will generate smaller and smaller GDP increases  Therefore, a constant growth rate cannot be achieved by just increasing capital  Similarly, human capital by itself cannot generate sustained growth due to the  diminishing marginal product of labor and diminishing marginal product skills   Mare and more H will generate smaller and smaller GDP increases  So a constant or sustained growth rate cannot be obtained by increasing human  capital  Technological change  Can actually generate sustained economic growth  Technological change is more than a constant increase, such as 10 more units. Rather, it  is exponential in that the rate of increase is approximately constant, such as 10%  New innovation and tech buld on existing stock of knowledge and thus are not  subject to diminishing returns  The economic history of the world can be broken down as such: 1) Pre­modern times: up to 1800 2) Industrial Rev: 1800 to 1820 3) Post­industrial Rev: 1820 to present  Thomas Malthus, writing in 1798, argued that human kind was destined to live at the  subsistence level: the min. level of income per person necessary to survive  According to Malthusian Cycle, any increase in income per capita above the  subsistence level would lead to higher fertility rates  THIS WAS PROVED WRONG 1) Industrial Rev. created tech. progress necessary for sustained growth 2) Movement of people from rural agriculture areas to urban manufacturing led to a  drop in fertility rates ( demographic transition)  Industrial Rev. was the beginning of major tech. growth   Was the beginning of sustained growth  Post­Industrial Rev. 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  Therefore must look at the income inequality of a nation  Although the negative relationship does not prove that growth causes declining poverty,  it does show that economic growth can provide an effective way of reducing poverty Chapter 8: Why isn’t the whole world developed?  Proximate cause of prosperity  K  A  H  Fundamental causes of prosperity  Root reasons for the differences in the proximate causes   The fundamental causes are ultimately the deep determinants of economic  development   Fundamental causes hypotheses 1) Geography hypothesis  Claims differences in geography, climate, and ecology are ultimately  responsible for the large differences in prosperity 2) Culture hypothesis  Claims that different values and cultural beliefs are ultimately responsible  for the large differences in prosperity 3) Institutions hypothesis  Claims that differences in the way societies organize themselves and shape the incentives of individuals and businesses are ultimately responsible for  the large differences in prosperity ***Economic Institutions o Aspects of society’s rules that concern economic transactions  Economic Institutions include:  Protection of property rights and ownership  Impartiality of the justice system  Financial arrangements between savers and borrowers  Regulations concerning new businesses or occupations Institutions have 3 important features I. They are determined by individuals  II. They place constraints on behavior III. They shape human behavior by determining incentives Inclusive economic institutions   Institutions that support and encourage economic transactions such as:  Protect private property   Uphold law and order  Allow and enforce private contracts  Allow free entry into new lines of business and occupations Extractive economic institutions  Institutions that remove resources from the economy such as:  Do not protect property   Do not enforce private contracts  Interfere with workings of markets  Restrict entry into new lines of business and occupations Political Institutions  The aspects of society’s rules that determine who holds political power and what types of constraints are placed on them  Extractive economic institutions tend to support inefficient firms and prevent  entrepreneurs with new ideas from entering the market


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Allison Fischer University of Alabama

"I signed up to be an Elite Notetaker with 2 of my sorority sisters this semester. We just posted our notes weekly and were each making over $600 per month. I LOVE StudySoup!"

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.