Chapter 12 verified questions and solution A+ grade
Solow I Theory of Growth - -Focus on physical capital as main driver of growth.
Production Function - -Y=F(labor, capital, natural resources)
Marginal Product (MP) - -Output change from an additional input.
Diminishing Marginal Product - -MP decreases as capital increases.
Steady State - -Net investment = 0 (investment = depreciation).
Convergence Prediction - -Poor countries should grow faster than rich countries.
Evidence Against Solow I - -Data does not support Solow 1: Some poor countries have
grown, many have stagnated.
Solow II Theory of Growth - -Adds technology as a driver of sustained growth.
New Production Function (Solow II) - -Y=A×F(labor, capital, natural resources)
Technology in Solow II - -Technology (A) increases productivity of all inputs.
Exogenous Technology - -Solow 2 assumes technology improvements happen outside the
economy.
Solow I Theory of Growth - -Focus on physical capital as main driver of growth.
Production Function - -Y=F(labor, capital, natural resources)
Marginal Product (MP) - -Output change from an additional input.
Diminishing Marginal Product - -MP decreases as capital increases.
Steady State - -Net investment = 0 (investment = depreciation).
Convergence Prediction - -Poor countries should grow faster than rich countries.
Evidence Against Solow I - -Data does not support Solow 1: Some poor countries have
grown, many have stagnated.
Solow II Theory of Growth - -Adds technology as a driver of sustained growth.
New Production Function (Solow II) - -Y=A×F(labor, capital, natural resources)
Technology in Solow II - -Technology (A) increases productivity of all inputs.
Exogenous Technology - -Solow 2 assumes technology improvements happen outside the
economy.
