Question

In the steady state of the Solow model, at what rate does output per person grow? At what rate does capital per person grow? How does this compare with the U.S. experience?

please write it in your own words

Answer 1

To decide whether an economy has more or less capital than the Golden Rule, we need to compare the marginal product of capital net of depreciation (MPK – δ) with the growth rate of total output (n + g). The growth rate of GDP is readily available. Estimating the net marginal product of capital requires a little more work but, as shown in the text, can be backed out of available data on the capital stock relative to GDP, the total amount of depreciation relative to GDP, and capital’s share in GDP.