Economic growth (I): basics - The production function and growth accounting
8 important questions on Economic growth (I): basics - The production function and growth accounting
What two assumptions are made when determining why capital stock and economy growth is at a certain level and why?
That everybody is employed
Because this way one ignores short run business cycles which would way overcomplicate things
What three assumptions are made for the production functions in Cobb-Douglass form?
2. If one factor remains fixed, the marginal effect of the other diminishes
3. If both factors rise with the same percentage, output raises with the same percentage
What does constant return on scale mean?
- Higher grades + faster learning
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What does growth accounting examine?
What two things does the perfect competition assumption in growth accounting imply?
2. That real interest rate, r = marginal product of capital
With what equality can one compute labour income share (1-α) in growth accounting?
How is capital income share given in growth accounting?
What does the Solow Residual Equation calculate?
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