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.