Intermediate Macroeconomics

The tutor initiates a series on the Solow Growth Model, focusing on its production function. They define it as a tool understanding long-term economic growth through combining capital (K) and labor (L). The model assumes exogenous total factor productivity. The tutor analyzes the production function's shape, showing an upward slope but decreasing rate of increase. They introduce marginal products: partial derivatives of output with respect to K or L, keeping one constant. Diminishing returns are illustrated via the law stating that each additional unit of capital contributes less output than the previous one. Two key assumptions are outlined: two factors of production (capital and labor) and investment as a constant fraction of output.

The tutor explores the Solow Growth Model, detailing its assumptions (closed economy, no government) and categorizing variables into exogenous (given, like initial capital, technology, saving rate, depreciation) and endogenous (calculated within the model, like output, consumption, savings/investment). Capital dynamics and price mechanisms are highlighted. Join for more: Subscribe to @AxiomTutoring.

In this video, learn two methods to define output in the Solow growth model: via production function, emphasizing total factor productivity; and through the expenditure approach, explaining the circular flow of income between firms and households. Aggregate demand and output identities are discussed, adapted for a simplified Solow model with no government or international links, reducing output to consumption plus investment. Join us next time as we delve into defining capital and capital accumulation.

Explore how investment in an open vs closed economy is defined. Learn about aggregate investment funded by domestic savings and foreign capital. Discover the impact of decreasing domestic savings on investment. Transition to the Solo Growth Model, where investment equals savings due to exogenous savings rate.

In this tutorial, we delve into the dynamic evolution of capital stock in the Solo Growth Model. We define how capital tomorrow is determined by balancing new investment and old capital after depreciation. Depreciation is illustrated using a three-period example with a 50% rate, leaving two machines functional after one period. Investment, a fixed proportion of output due to exogenous savings rates, fuels capital accumulation. Our final equation for capital accumulation integrates these factors and will prove pivotal in future growth discussions. Subscribe to @AxiomTutoring.

Join as we delve into the Solow Growth Model's core assumptions, focusing on their practical usefulness rather than merely stating them. We begin by recalling the model's goal: combining capital accumulation, labor growth, and technological progress to determine an economy's long-run output per worker. Key terms explored are 'long run' and 'per worker', emphasizing the importance of comparing economies accurately. The lecture discusses three main assumptions: positive marginal product of factor input, diminishing marginal product, and constant returns to scale. Each assumption is explained intuitively, highlighting their real-world relevance and role in determining steady-state capital levels and long-run growth. Subscribe to @AxiomTutoring for more comprehensive economics insights.