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Essay / Research Paper Abstract
This is a 4 page paper discussing economic growth and the Solow growth model. Robert Solow’s growth model emphasizes all of the aspects of the importance of economic growth within a society. It includes components of the supply and resources of a nation which can expand opportunity for a country’s production. The supply component however is determined by its labor force growth rate and increases in the productivity of the workers. This increase leads to increases in the capital/labor ratio which in turn results in improvements in technology. Above all, savings are critical in that they must be high enough to replace the depreciated capital and also provide for the workers. Lower savings means lower worker productivity and lower living standards. The Solow growth model basically defines the conditions of different nations’ approach to an equilibrium level of capital stock (a steady-state). While developed nations such as the United States have reached this level of steady-state, other developing nations are still experiencing rising levels of high savings and rising capital/labor ratios.
Bibliography lists 5 sources.
Page Count:
4 pages (~225 words per page)
File: D0_TJSolow1.rtf
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Unformatted sample text from the term paper:
of Physical and Human Capital represent production not intended for direct consumption. Rather, the creation and accumulation of capital is intended to increase the level of productivity of a nation
and thus allow for an increase in the production of goods and services at future date. Capital may be thought of as an Intermediate Good or a good used to
produce other goods" (Ruby, 2003). Nations is order to obtain economic growth must be able to give up the current consumption of Final Goods (those used for direct consumption) to
be able to make the resources available for the accumulation of this capital. Increases in the labor force growth rate and worker productivity also result in improvements in technology. This
is can be seen as the differences between those countries which are rich and grow faster than those which are poor and grow slower primarily because rich countries are able
to defer consumption (resulting in savings) as being able to save means that the nation is able to meet the basic needs of its citizens with the existing technology and
resources available. On the other hand, "a country that exists on the frontier of subsistence could [only] make resources available for the creation of capital only at the expense of
feeding a given proportion of its population [and] in this case, capital accumulation comes with the price of starvation" (Ruby, 2003). Every nation must contend with certain trade-offs which exist
between the production of Intermediate Goods (capital) or Final Goods (consumption). An interactive graphic example of this trade can be demonstrated at "The Accumulation of Capital and Economic Growth" (http://www.digitaleconomist.com/cap_4020.html)
(Ruby, 2003). In 1956, Robert Solow developed the Solow Growth Model as a way to understand the relationship between current production, savings activity and the accumulation of capital which "defines
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