Thank you for this clear explanation, sir. To be honest, I was a bit reluctant to stay on this video at first because of your accent...(sorry, it often makes the lectures hard to understand and unbearable) BUT from the very first minutes you were incredibly straight forward to the point and very clear!!
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It's a little confusing, we defined α as the share of GDP paid out to capital in earlier readings (or the corresponding increase in GDP growth wrt an increase in one % of Capital , now going by the steady state growth rate formula, if suppose we allot most of our GDP to capital, does that lead to an infinite growth rate? Apart from being illogical, isn't it also contradictory? Secondly, the reading says that "countries with higher saving rates will have a higher level of per capita output" but isn't savings rate in the denominator of the formula and thus inversely proportional?
To answer your question more attribution of saving will not lead to infinite growth because capital has diminishing marginal of returns. After certain period , capital required to maintain those physical stock will be higher which we relate as depreciation. It will lead to increase growth rate . To answer 2nd question, saving or let say investment will add to out-put level but it will not lead increase to growth rate. Again same reason DMR (MPK).
Thank you for this clear explanation, sir. To be honest, I was a bit reluctant to stay on this video at first because of your accent...(sorry, it often makes the lectures hard to understand and unbearable) BUT from the very first minutes you were incredibly straight forward to the point and very clear!!
Dear IFT fan & follower. Thank you for your kind words. We are really pleased that you are able to benefit from IFT CZcams videos. Be sure to Like the videos; share IFT videos within your social media circles; Like the IFT FB page (facebook.com/CFA.Trainer). Please also join Analystforum.com where we will be most grateful if you can show your status as “Studying with IFT”. Thank you! - IFT Support Team
good summary, thanks.
Glad it was helpful!
IFT Support Team
Thank you
You're welcome
IFT Support Team
It's a little confusing, we defined α as the share of GDP paid out to capital in earlier readings (or the corresponding increase in GDP growth wrt an increase in one % of Capital , now going by the steady state growth rate formula, if suppose we allot most of our GDP to capital, does that lead to an infinite growth rate? Apart from being illogical, isn't it also contradictory?
Secondly, the reading says that "countries with higher saving rates will have a higher level of per capita output" but isn't savings rate in the denominator of the formula and thus inversely proportional?
To answer your question more attribution of saving will not lead to infinite growth because capital has diminishing marginal of returns. After certain period , capital required to maintain those physical stock will be higher which we relate as depreciation. It will lead to increase growth rate .
To answer 2nd question, saving or let say investment will add to out-put level but it will not lead increase to growth rate. Again same reason DMR (MPK).
the reason I watched this video was because non of the variables were defined in my other curriculum. You failed to define most of the letters.
Thanks for your feedback. We will try to include all the definitions
IFT support team