## Econ 101b: Fall 2006: Handout: August 29 Lecture

#### Introduction to the Course, and Introduction to the Theory of Economic Growth

A few graphs:

- World income distribution and telephone usage 2005
- World income distribution and telephone usage 1975
- U.S. nonfarm employment, 1940-2006
- U.S. real GDP per worker, 1950-2006

A simple model, the Solow model, for analyzing an economy with labor L, capital K, and technology E...

- The Solow model assumes:
- The labor force grows at a constant proportional rate n
- The rate of improvement of "technology" is a constant proportional rate g
- Savings leads to investment of a fraction s of output Y in increasing the capital stock K
- A constant proportion delta of the capital stock K wears out each period.
- How much of the cross-country and cross-time pattern of economic growth can we explain with this simple model?

Course website: http://berkeley101bfall2006.vox.com/