Growth, Capital Accumulation, and the Financial System

… a core topic in Macroeconomic Policy

Click for MRU videos

Click for MRU videos

Topic description

This topic introduces students to the Solow models of economic growth, capital accumulation, savings, investment and the financial system.

The Atlas treatment of this topic closely follows that in Chapter 3  – Growth, Capital Accumulation, and the Economics of Ideas and Chapter 4 – Savings, Investment, and the Financial System, in the open access course entitled Principles of Macroeconomics presented by Tyler Cowen and Alex Tabarrok on the Marginal Revolution University (MRU) online education platform (, accessed 23 April 2016). In late April 2016 the MRU course site did not yet have videos available for the core concepts on the table below that do not have a hot link (those not in blue). Concept pages will be created on the Atlas once those MRU resources become available.

Topic learning outcome

Appropriately utilize and interpret results of applying to public policy problems the basic principles of growth theory, including following core concepts.

Core concepts associated with this topic (MRU videos not yet available for unlinked concepts)
Economics of Ideas

Human Capital and Conditional Convergence

Idea Equation


Patents vs. Idea Spillovers

Physical Capital and Diminishing Returns

Solow Model and Ideas

Solow Model and the Steady State

Solow Model of Economic Growth

Other concepts

These concepts were not used directly in the MRU lessons but have been identified from courses and have short descriptions on the Old Atlas. Some may be added to the core and be elaborated in a page in this Atlas.

Central Bank

Interest Rate Parity

Net Exports

Open Economy

Quantity Equation


Theory of Interest Rate Parity

Trade Deficit

Trade Surplus


Atlas pages: Growth, Capital Accumulation, and the Financial System and its associated Concepts.

Alex Tabarrok, Introduction to the Solow Model, at, accessed 23 April 2016.

Alex Tabarrok, Physical Capital and Diminishing Returns, at, accessed 23 April 2016.

Alex Tabarrok, Solow Model and the Steady State, at, accessed 23 April 2016.

[More to come when MRU videos come available.]

Textbook readings in MPP and MPA courses 

to come

Assessment questions (from MRU Practice Questions for Chapters 3 and 4)

  1. Japan’s and Germany’s economic growth after World War II are both examples of:
  2. The following diagram appeared in the video; what does portion B represent?
  3. For the next two questions, consider the following: Country A has K=10,000 and produces GDP according to the following equation: GDP=5√K. If the country devotes 25% of its GDP to making investment goods, how much is the country investing?
  4. more to come

Page created by: Ian Clark, last modified on 12 May 2018.

Image: Business Incubators: India, at, accessed 23 April 2016.