Question

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

Answer #1

When the population growth rises, this implies that there will be lesser capital per worker. Due to this, the output per worker will fall. This is because output per worker is the function of capital per worker in the solow model.

Or y= f(k)

Where y= output per worker and k = capital per worker.

However, the rise in number of workers in the economy will lead to rise in total income.

Therefore, the given statement can be re written as:

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

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

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.

Suppose an economy described by the Solow model is in a steady
state with population growth n of 1.8 percent per year and
techno- logical progress g of 1.8 percent per year.Total
output and total capital grow at 3.6 percent per year. Suppose
further that the capital share of output is 1/3. If you used the
growth- accounting equation to divide output growth into three
sources—capital, labor, and total factor productivity—how much
would you attribute to each source?

Question #1: The Basic Solow Model
Consider an economy in which the population grows at the rate of
1% per year. The per worker production function is y = k6, where y
is output per worker and k is capital per worker. The depreciation
rate of capital is 14% per year. Assume that households consume 90%
of their income and save the remaining 10% of their income.
(a) Calculate the following steady-state values of
(i) capital per worker
(ii) output...

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?

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.

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

Consider the simple version of the Solow model, with no
population growth and no technological change. Suppose that, due to
an aging capital stock, an economy experiences a sudden increase in
its depreciation rate.
a. Show the impact of an increase in the depreciation rate to ?
′ > ? on the diagram.
b. What happens to the steady-state level of capital?
_______
c. What happens to the level of output in the steady state?
_______
d. Assuming that the...

Answer the following questions using the basic Solow growth
model, without population growth or technological progress.
(a) Draw a diagram with per worker output, y, consumption, c,
saving, s and investment, i, on the vertical axis and capital per
worker, k, on the horizontal condition. On this diagram, clearly
indicate steady-state values for c, i, and y. Briefly outline the
condition that holds in the steady- state (i.e. what is the
relationship between investment and the depreciation of
capital?).
(b)...

1. For the following, assuming that there is no population
growth or technological progress.
a) What is the equation that defines the steady-state level of
capital per worker?
b) How would you determine the steady state level or output per
worker (i.e., real GDP per capita) from (a).
c) Explain, in words, how an economy that starts with too much
capita per worker gets to its steady state.
2. Many demographers predict that the United States will have
zero annual...

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