Question

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.

Answer #1

Let us examine the given options

A. The higher steady-state capital per capita, the higher the output/income per capita.

**True, output per capital is directly proportional to the
capital per capita.**

B. The higher output/income per capita, the higher consumption per capita.

**False, consumption depends upon savings.**

C. Golden-rule capital per capita must be a steady state, but not all steady-state is also a

golden-rule.

**True, Golden rule capital per capita is a special case
of steady state capital per capita.**

D. Golden-rule capital per capita can be achieved by setting the saving rate at the appropriate level.

**True. we can achieve golden rule capital per capita by
setting the saving rate a appropriate level.**

**Correct option is**

**B. The higher output/income per capita, the higher
consumption per capita.**

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 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

1) In the steady state of the Solow model with technological
progress, which of the following variables is not
constant?
(a) capital per effective worker
(b) the real rental price of capital
(c) the real wage
(d) the capital-output ratio
2) The U.S. economy has more/less capital than at
the Golden Rule steady state, suggesting that it may be desirable
to
increase/decrease the rate of saving.
3) The purpose of exogenous/endogenous
growth theory is to explain technological progress. Some of these...

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...

18）At the current steady state capital - labor ratio, assume
that the steady state level of per capita consumption, ( C N ) ∗,
is less than the golden rule level of steady state per capita
consumption. Given this information, we can be certain that:
A.An increase in the saving rate will cause an increase in the
steady state level of per capita consumption .
B.A decrease in the capital-labor ratio will cause a decrease in
the steady state level...

1. In the Solow model without exogenous technological change,
per capita income will grow in the long term as
long as the country has an initial level of capital below the
steady state level of capital (k o < k ⋅)
TRUE OR FALSE?
2. In the Solow model without exogenous technological change, per
capita income will grow in the short term as long
as the country has an initial level of capital below the steady
state level of capital...

2. The Solow-Swan Model
a) Consider an economy that is initially in a steady state
equilibrium. Assume that in this equilibrium it has a saving rate
of 50 per cent and a depreciation rate of 2 per cent. Further
assume that the population is constant and that the level of output
produced can be represented by the following production function: Y
= AKαL 1−α where A = 1 and α = 0.5. Use the Solow-Swan model to
determine the level...

1. If the technology (production function) and all the Solow
model parameters are same for two economies, they will eventually
converge to the same steady state levels of per-capita capital even
if they start at different levels of initial k.
True
False
2. If the technology (production function) and all the Solow
model parameters are same for two economies, more time taken will
be needed to reach steady state for the economy with high initial
level of per-capita capital?
True...

Consider how unemployment would affect the Solow growth model.
Suppose that output is produced according to the production
function Y = Kα [(1 – u)L]1-α where K is
capital, L is the labor force, and u is the natural rate of
unemployment. The national saving rate is s, the labor force grows
at rate n, and capital depreciates at rate δ.
a. Write a condition that describes the golden rule
steady state of this economy.
b. Express the golden rule...

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?

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