Question

In the Solow model, increases in the rate of population growth and increases in the rate of technological progress both lower the steady state values of capital and output per efficiency unit. True or false: Therefore both are undesirable. If false, explain how they differ in their consequences for levels and growth rates of Y/L.

Answer #1

Answer) The given statement is True, If Population growth rate is assumed at the rate of n then it becomes an additional source of depletion of capital stock per capita. This is because net capital stock per capita not depletes due to depreciation but also due to population growth. It reduces steady state level of per capita capital stock and per capita output as compared to zero population growth.

In case of technology it was taken as exogenous as it is observed that productivity of labor increases with technical progress. Workers are more efficient with technology so they need more capital now.

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...

In the solow growth model, the steady-state growth rate of
output per worker is ________
(a) equal to the sum of the rate of technological progress plus
the rate of population growth
(b) greater than zero
(c) equal to zero
(d) less than zero

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

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)...

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...

According to the Solow growth model, all the following is true
except: a) A country with a lower population growth rate (all else
the same) will have a higher level of output per person in the long
run. b) Less developed countries will tend to catch up with rich
countries in output per-person if they have comparable rates of
saving, depreciation, and population growth c) The growth rate in
output per person is higher if a country is farther away...

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?

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...

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...

In the Solow growth model. if the saving rate increases, then
output per person ___________ and consumption per person
___________.
A. may increase or decrease; decreases.
B. increases; may increase or decrease.
C. increases; decreases.
D. decreases; may increase or decrease.

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