Question

what are the main conclusions of the solow growth model, explain steady state as part of your answer?

Answer #1

The Solow model depicts how growth in saving and population determine an economy's steady-state capital stock and its steady state level of income per individual. It reflects how in the long run, nations that save a high fraction of their output are richer and why nations with high levels of population growth are poorer. It concludes that when nations are in their steady states i.e. when output per worker and capital per worker are constant, then:

1. Rich nations have higher saving (investment) rates than poor nations

2. Rich nations have lower population growth rates than poor nations

According to the Solow model of growth, growth, in the long run
(the steady-state), determine only by growth in technology.
However, in the Solow model, there is nothing about how technology
determined. What factors do you think might affect technology in
the long run? Justify your answer and explain the implications to
the growth in the long run?

What is the “steady state” in the Solow growth model? How is it
reached from some other initial situation in which the conditions
required for the steady state are not satisfied?

In the steady state of the Solow model, higher population growth
leads to a _________ level of income per worker
and _________ growth in total income.

In the Solow growth model of an economy with population growth
and technological progress, the steady-state growth rate in output
per worker is equal to:
(a) zero
(b) the rate of technological progress g.
(c) the growth rate of population n plus the rate of technological
progress g. (d) the rate of technological progress g minus the
growth rate of population n.
In the Solow growth model of an economy with population growth
and technological progress, the steady-state growth rate...

In the solow growth model, the steady-state growth rate of
output per worker is ________
(a) equal to the sum of the rate of technological progress plus
the rate of population growth
(b) greater than zero
(c) equal to zero
(d) less than zero

Use the Solow-Swan model to explain what would happen to steady
state capital per
effective worker resulting from:
a. A decrease in the population growth rate.
b. An increase in labor productivity.
c. An increase in the investment share of GDP.

In the Solow growth model with population growth but no
technological progress, if in the steady state the marginal product
of capital equals 0.10, the depreciation rate equals 0.05, and the
rate of population growth equals 0.03, then the capital per worker
ratio ____ the Golden Rule level.
A) is above
B) is below
C) is equal to
D) will move to

What is the impact of δ on the steady-state solution of the Solow
model? Why is this?

According to the Solow growth model, why do all countries tend
to converge to a steady state?

Which of the following statements about the Solow growth model
is FALSE?
A. The higher steady-state capital per capita, the higher the
output/income per capita.
B. The higher output/income per capita, the higher consumption
per capita.
C. Golden-rule capital per capita must be a steady state, but
not all steady-state is also a golden-rule.
D. Golden-rule capital per capita can be achieved by setting
the saving rate at the appropriate level.

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