Week 8- Growth in the Very Long Run

[JOAQUIN SHORT INTRO VIDEO HERE]

Last week we learned a basic version of the Solow growth model in which we can only see growth in output per capita during the periods in which the economy is transitioning from one steady state to another. The model of last week is not able to explain an stylized fact of macroeconomics: output per capita grows in most countries over long periods of time. For example, think about the United States, standards of living are much better now than they were a hundred years ago or even fifty years ago. This is the same for most countries in the world.

This week we introduce a small modification to our version of the Solow growth model that will allow us to explain sustain growth over time as we see in most economies. The small modification consists on adding technology growth to the model.

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To Do:

• Review each section one at a time and in order. You should do the readings, then watch the videos and then complete the practice problems.
  • Section 9.1 to 9.3
• Next, ask questions on the Week 8 discussion board.
• Complete the quiz.
• Complete and submit the assigned problems from Problem Set 4.