Economic growth (I): basics - What about consumption?
3 important questions on Economic growth (I): basics - What about consumption?
What does savings equal in a steady state?
required investment
In what four steps does one find the golden values of macroeconomic variables?
1. Draw production function
2. Draw requirement line
3. Find the point where slope production function equals slope requirement line. This yields K*gold, Y*gold and C*gold
4. actual savings curve intersects requirement line @ K*gold
2. Draw requirement line
3. Find the point where slope production function equals slope requirement line. This yields K*gold, Y*gold and C*gold
4. actual savings curve intersects requirement line @ K*gold
Why is a steady state called dynamically efficient if s<sgold?
Because it can take generations to recover when s has to be increased to equal sgold
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