Question

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?

Answer #1

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

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...

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?

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?

1. Generally speaking, how does the Solow Growth Model improve
upon the model of relying on TFP differences to explain growth
across countries?
2. Describe, in your own words, the following terms in the Solow
Growth Model.
(a) Steady state
(b) The Principle of Transition Dynamics
(c) The capital accumulation equation

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.

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