Question

Problem 2

a. The predictions of the Solow growth model lead us to be optimistic about the prospects of poorer countries to

reaching the standard of living of richer countries in the very long run. What element in the Solow model of growth drives this result? Is this result confirmed in the data?

b. A given rate of growth may be driven by a high rate of capital accumulation and/or a high rate of technological progress. Does the source of growth matter for assessing the growth prospects of an economy?

Answer #1

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...

1.
In Solow model without technological progress, a 5% increase in
capital stock K
will cause:
Group of answer choices
Y to increase by exactly 5%.
a decrease in K/N.
a decrease in Y/N.
no change in Y/N.
Y to increase by less than 5%.
2.
Assume that an economy experiences both positive population
growth and technological progress. Once the economy has achieved
balanced growth, according to Solow model with technological
progress, we know that the output per effective worker...

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