GROWTH ACCOUNTING It is generally believed that labour accounts for about 2/3 of all income generated, and that capital accounts for approximately 1/3 of national income as such, percentage-growth in potential national income is = to the percentage...

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The Neoclassical Growth Model and Steady States

THE NEOCLASSICAL GROWTH THEORY: This focuses on capital accumulation, and how it is affected by savings One important function in the neoclassical growth theory is the AGGREGATE PRODUCTION FUNCTION. This function shows the relationship between total...

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Economic Growth: Savings and Investments

The Very Long Run: Economic Growth Models We can measure long run economic as the annual percentage change in per-capita real potential GDP.Ecoonomic growth causes Y* to move to the right. The standard of living is measured by the per capita real actual...

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Macroeconomic Timespans

Macroeconomic Time Spans: Changes can have different effects over the long run than they do in the short run! This is just going to be a brief comparison exercise between the long run and the short run. -------------> <------------- -------------> <--------------------------> <--------------------------> <--------------------------> <-------------...

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Supply and Demand-Side Economics

Long-run aggregate supply, however, can shift if the potential national income shifts. When potential national income increases, this brings the equilibrium price level down, and the equilibrium level of GDP up in the long run. Neoclassical economists...

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Supply Shocks and Other Important Things!

SUPPLY SHOCKS: These also correct themselves in the long-run, but unlike demand shocks, these do not cause any net changes in the price level. NEGATIVE SUPPLY SHOCK -Let's say that the cost of oil rises: this shifts AS to the left, which decreases overall...

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Factor Prices and the Output Gap!

Oh dear god, am I ever behind schedule for these notes... Okay, today, we're going to have a look at what happens to our economic model when we allow factor prices (this usually refers to wages) to vary. Up until this point, we've been assuming that...

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