View source for Balanced growth equilibrium

==Definition==

A '''balanced growth equilibrium''' refers to a situation where an economy has settled into a long-run growth path where only its overall size is changing, and its composition remains constant. Explicitly:

* Measures of the total quantity of inputs and outputs (such as capital stock, GDP, effective labor supply) grow exponentially (i.e., they have a constant exponential growth rate).
* Measures of ratios between quantities of inputs and outputs (such as savings rate, capital intensity) remain constant.

The term '''balanced growth model''' may be used for a model that has a balanced growth equilibrium, or somewhat more narrowly for a model that asymptotically converges to a balanced growth equilibrium from all (or most) initial conditions, including unbalanced ones.