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Macroeconomics: Economic growth part 3

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This step is about the production function and how it is affected by capital accumulation and technological progress. Capital accumulation refers to the increase in capital per worker which is determined by the saving rate. Technological progress is an improvement in technology which shifts the production function upwards, leading to higher levels of output per worker. An increase in the saving rate will lead to a period of higher growth until the economy reaches a higher steady state level. To have sustainable economic growth, technological progress is necessary as it leads to larger quantities of output and better products."

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