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Economics for valuat

QuestionAnswer
Factors that are positively related to growth rate •Savings and investment •Financial markets and intermediaries -political stability, sound laws and property rights -investment in education and healthcare systems -tax and regulatory systems -free trade an unrestricted capital flows
Physical capital is separated into? (I) infrastructure (C) computers (T) Telecommunications Non ICT - machinery, transportation, & non residential
In the long run Growth in equity prices = GDP growth rate
Cobb Douglas production function = Y= TK^a L^(1-a) T= total factor productivity
In a steady state marginal product of capital (MPK)= Rental price of capital (r)= aY/K
What is the productivity curve? Graph of labor productivity versus capital per worker for a given level of technology
Productivity curve has two sources of economic growth 1. Growth and capital per worker-Capital deepening 2. Technological change growth in total factor productivity
What is the labor productivity growth accounting equation? Growth rate and potential GDP = long-term growth rate of labor force + long-term growth rate in labor productivity (includes capital deepening)
Ownership of natural resources may actually hinder growth in 2 manners 1. The dutch disease- ownership of natural resources pushes up the value of domestic currency to the detriment of other industries 2. Other industries may be neglected
What are the four labor supply factors? 1.demographics; aging of population 2. Participation; labor force/working age population 3. Immigration; can be used to overcome declining labor force 4. Average hours worked; cultural factors, labor regulations, and taxation
What is considered capital and technology? •Human capital:qualitative measure of knowledge and skills •Physical capital: ICT and non-ICT •Technological development – includes investment in physical and human capital •public infrastructure
What are the three growth theories 1.classical growth Theory 2.neoclassical growth theory 3.endogenous growth Theory
What is the main point of the Classical growth Theory? Main point is there's no permanent improvement in standard of living from new technologies
What is the reversing mechanism for the classical growth Theory? Population growth Economic growth leads to population growth
What is the main point for neoclassical growth theory? Economic growth results from lucky discoveries of new technology
What is the major difference between the classical theory and neoclassical growth theory? Economic growth is independent of population growth
According to the neoclassical growth theory - the steady-state growth rate in productivity depends only on what? Technology and (1-a) output allocated to labor
What are the first 3 major tenets of neoclassical growth theory? 1. capital deepening occurs affecting output but not the growth rate 2. Economy will move toward steady-state equilibrium 3. Steady state savings and investment are just sufficient to cover new workers and capital depreciation
What is the last major tenet of neoclassical growth Theory? Developing countries with low capital to labor would have lower diminishing marginal productivity of capital
What is the main point of the endogenous growth Theory? Technological progress is endogenous and the economy is a perpetual motion machine
What are the three convergence hypothesis? 1.absolute convergence: Standard of living will converge globally 2. Conditional convergence: only for countries with similar savings, population growth and production functions 3. Club convergence: countries with similar institutional features
What are the three growth benefits of removing trade barriers? 1. Access to foreign savings 2. Comparative advantage in production 3. Economies of scale •Neoclassical growth theory focuses on convergence •Endogenous growth theory focuses on social benefits
What are factors that affect spread for currency? —The spread in the interbake market; •Currency pair involved •Time of day window •Market volatility —-The size of the transaction —-Dealer/client relationship —Forward spreads are positively related to maturity
Created by: Lizarias85
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