Output and Capital Grow with Population

It is assumed that labor force, capital and output will grow at a constant rate. As the population increases, we need to invest more money to keep the "capital of each worker" unchanged. This is part of the investment line (NK). Curve Y shows per capita production and curve Sy shows per capita savings / investment. This model shows "steady state" (E) where each worker's savings (Sy) intersects the investment line (NK). This indicates that the investment is sufficient to keep the capital of each worker unchanged (K *), resulting in the output (Y *) of each worker.

Production volume of each worker is proportional to proportion of capital to production ratio. Therefore, if there is no other change, if you know the growth rate of the capital labor ratio, you can immediately calculate the production growth rate of each worker. If α is 1/2, if the capital labor ratio increases by 4% per year, the production of each worker will increase. Equilibrium condition: In addition to behavioral analysis, economists also consider equilibrium conditions. If the economy is balanced. If the equilibrium condition is not established, the economic situation must change rapidly and transition to the state where the equilibrium condition exists. In microeconomics, the main equilibrium condition is that supply must be equal to demand.

Here, Francisco outlined the perfect currency balance with Owen Fisher. The basic idea is that as money supplies lubricants to the population and economic or economic production grows naturally and steadily, demand for money is also great. If the money supply does not grow with the economy, the economy will be affected. Fisher says that the result will be a depression when the quantity of products and services produced are too small and M is not produced. I express sympathy for those who say "modify M and let P and Q solve it yourself." But there is another better way - that is to allow M to cope with the need for money

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Currently, the population growth rate must play an important role in determining the characteristics of the output, ie the composition of the flow of the final product. Therefore, as the population rapidly increases, the per capita floor area will be much larger than the new housing. A fixed population with most elderly may need more personal services; composition of consumer demand will have a significant impact on the amount of capital needed. Housing demand requires a large amount of capital investment and demand for personal services can be met without increasing the amount of investment expenditure. Thus, the transition from a rapidly growing population to a steady population or declining population tends to change the composition of the final flow of consumer goods and reduce the ratio of capital to total production .