The Model Of Economic Growth

1751 Words Nov 7th, 2014 8 Pages
‘The framework presented here is based on the notion of population increase’ (Bucci 2009) with attention to the solow model and the AK model of economic growth. The differences and similarities in these growth models will be critically assessed with the use of empirical evidence to explain the real world economic growth patterns.

The solow model is ‘a theory that analyses growth as being driven by exogenous technological change and the accumulation of factors of production’ (burda&wyplosz 2013 p561). ‘The AK model is an endogenous growth model it explains the sustainable by exogenous technological advances . It tracks down the sources of economic growth to the accumulation of factors of production with particular emphasis on knowledge.’ (Burda 2013 p551).
Economic growth on the other hand refers to the ‘increase in the capacity of an economy to produce goods and services.’ It can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation (Investopedia 2014). GDP (Gross domestic product) which is ‘the monetary value of all the finished goods and services produced with a country’s boarders in a specific time period’ (annually) (Investopedia 2014) GDP is used when comparing economic growth between countries as these take into account population differences between countries’ (Investopedia 2014). Population growth is the increase in the number of people in a country, state or city. The formulae for population growth is (Birth…
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