(BQ) Part 2 book "Macroeconomics - Manfred gartner" has contents: Endogenous economic policy, the European Monetary System and Euroland at work, inflation and central bank independence, budget deficits and public debt, unemployment and growth, real business cycles - new perspectives on booms and recessions,.and other contents. | 4/6/09 8:21 PM Page 240 CHAPTER 9 Economic growth (I): basics What to expect After working through this chapter, you will understand: 1 What determines the levels of income and consumption in the long run. 2 What growth accounting is and how it is used to measure technological progress. 3 Why and how a country ends up with the capital stock it has. 4 Why having a larger stock of capital may open more consumption possibilities, but may also require people to consume less. 5 Why some countries are rich and some are poor. 6 What makes income per head grow over time. We now possess a model that permits us to understand what makes actual income fluctuate around potential income. This DAD-SAS model explains why the circular stream of income oscillates – that is, becomes wider and thinner within its natural bed. We have not yet discussed what shapes the bed of the stream, since we assumed that this shaping would proceed slowly and thus has different causes to the more short-run fluctuations of the stream. It is these longer-run trends in income to which we now turn. Stylized facts of income and growth The empirical motivation for turning our attention to the determinants of potential income and steady-state income derives most forcefully from international income comparisons. As we saw in Chapter 2, a person in the world’s richest economies on average earns 50 times as much as a person in the poorest countries. Such differences, documented again for a different set of countries and data in Figure , can hardly be attributed to an asynchronous business cycle with one country being in a recession and the other enjoying a boom, though business cycles are important. In the course of a recession income may recede by 3–5%; by up to 10% if the recession is bad; or even more if it is a deep recession like the Great Depression of the 1930s. But this happens very seldom, and not even this would come close to .
