general saving rate rules  

• saving rate has no effect on long-run growth
  • output growth in long run is equal to 0
  • converge to specific K/N in long run >> converge to specific Y/N >> no growth w/ constant Y/N
• saving rate determines level of output
  • higher savings rate >> higher output per worker in long run
• increase saving rate >> higher growth of output for a short while
  • by increasing saving rate, output per worker must also increase to new steady state

different saving rates  

• note that different saving rates lead to different steady states
• lower saving rate (dotted line) leads to a lower steady state and lower output per worker
• however, note that at either steady state, the growth rate is still 0

saving rate and consumption  

• increase in saving >> decrease in consumption initially
• increase in saving >> increase in output per worker, not necessarily consumption
  • saving rate = 0 >> output at 0 >> 0 consumption in long run
  • saving rate = 1 >> no one spending money >> 0 consumption in long run
• golden rule of capital - capital level that results in highest level of consumption at the steady state
• C/N = Y/N - d K/N

human capital - as opposed to physical capital  

• increase in worker skill acts similar to increase in capital per worker
• Y/N = f(K/N, H/N)
  • H/N = human capital per worker
  • H increases w/ experience, education
• education - partly consumption, partly investment
  • postsecondary education - costs include cost of education (tuition) and opportunity cost (lost wages)
• endogenous growth - steady growth w/o technological progress
  • increase in both physical and human capital per worker