Guys, I am stuck (probably with basic math).
I refer to CFA books level 2 page 638, reading 14.
How do I go from:
Δk/k=Δy/y=ΔA/A + αΔk/k
to:
Δy/y=Δk/k=(ΔA/A)/(1**-α)**
They later say “this is a key result of the neoclassical model”, so I thought I should know how to arrive to this conclusion.
I think I am completely lost in the neoclassical growth model. Can you direct me to a good (free) tutorial/explanation of this model?
The way they lay this out is quite “rapid fire” and I got stuck here too. To clear it up a little, you just have to think of Δk/k as a single variable.
Remove the Δy/y from the first line so you have Δk/k=ΔA/A + αΔk/k
Then you can use basic algebra to move α(Δk/k) over to the LHS.
Δk/k - αΔk/k** =ΔA/A**
Then its just a case of factoring out the Δk/k:
Δk/k (1 - α) =ΔA/A
and finally rearranging in terms of Δk/k
Thank you very much! It helped!