Chapter 11
Saving, capital accumulation & output
Key questions:
• What are the interactions between output and capital accumulation?
• What are the dynamics of capital and output over time?
• What is the steady-state of capital and output?
• How does the saving rate affect the growth rate of output per worker?
Interactions between output and capital
Output in the long run is determined by two basic relations between output and capital:
The amount of capital determines the amount of output being produced.
The amount of output determines the amount of saving, and in turn, the amount of capital
accumulated over time.
,
Saving, capital accumulation & output
Key questions:
• What are the interactions between output and capital accumulation?
• What are the dynamics of capital and output over time?
• What is the steady-state of capital and output?
• How does the saving rate affect the growth rate of output per worker?
Interactions between output and capital
Output in the long run is determined by two basic relations between output and capital:
The amount of capital determines the amount of output being produced.
The amount of output determines the amount of saving, and in turn, the amount of capital
accumulated over time.
,
