Economic Growth and Economic Fluctuations Essay

Economic addition and Economic Fluctuations - Essay ExampleThe stinting theories and baffles examined would be the Solow Model, the human capital theory and screening model. The effects of governmental policies on the openness of the parsimony will also be examined here. The data given will serve as guiding hale in the determination of the ability of our study country to achieve rapid short-term economic offshoot and long-term sustenance of a steady rate of result.When charged with the responsibility of determining the best constitution to foster long-term economic growth, it is vital to analyze many economic factors and trends. These factors include the impact of productivity, savings and depreciation on the economic system as well as the economys ability to sustain long-term growth under the given circumstances. In so doing, the Solow Model can serve as a command guidance in determining whether an economy can sustain long-term growth given the break combination of factors . In order to examine this it is vital to offer an operational definition of Solows model. Solows model is a model the ontogeny in the capacity of a countrys economy to produce goods and services over time. This increase theoretically implies that the well-being of the citizens will improve over time. According to Solow the increase can be contumacious utilizing a formula whereby the GDP is determined by combinations of inputs. Solow simplifies this very intricate function by presuming certain(prenominal) factors are held constant. One of the most fundamental simplifications is the assumption that a single(a) good is produced by the economy in question. In so doing, the GDP is greatly simplified and its implications are clearly depicted. The other assumptions of the Solow model include the assumption that all data is collected on a time continuum, a single good is produced with a constant technology, at that place is no governmental or international trade, all factors of perfo rmance are utilized to their full capacity, the growth within the labor force is constant. Utilizing the relationship existent amidst the savings and the investment and extending the Solow model further, we can assume that the depreciation rate, the amount of capital depreciation and the channelize in capital over time are held constant. The implications of this are such that in the long-run, we are equal to(p) to yield a production function whereby Y = AF(K, L). Essentially, it establishes a relationship between capital form and the economic take. Taking this one step further and assuming that labor input is held constant and there is a positive correlation between changes in capital and output we can see that in time additions to capital stock will yield additions in output. This relationship can be express in terms of labor and economic output. In so doing, we can determine the economic output for each individual in the society. The pertinent equation is y=Y/L and can be gr aphically depicted as followsThe Impact of Savings Rate on Long-term Economic GrowthAfter having examined the production function, we need to examine a prudent question-Is it possible for our country of study to thumb up with richer countries and at what rate will it occur In examining that question, we need to realize that according