Imagine a Solow–Swan model with the technology parameter (A) constant. The saving rate is θ, the population growth rate n, and the depreciation rate d. When the model has reached the steady state, the capital stock K will:Group of answer choicesBe constantBe rising at the rate nBe rising at the rate θ(Y/L)/(d + n)
Question
Imagine a Solow–Swan model with the technology parameter (A) constant. The saving rate is θ, the population growth rate n, and the depreciation rate d. When the model has reached the steady state, the capital stock K will:Group of answer choicesBe constantBe rising at the rate nBe rising at the rate θ(Y/L)/(d + n)
Solution
In the Solow-Swan model, when the economy reaches a steady state, the capital stock (K) will be constant. This is because, in the steady state, the amount of new capital created by saving (which is a fraction θ of output Y) just balances the amount of capital that depreciates or is diluted by population growth. Therefore, the capital stock does not change, i.e., its growth rate is zero.
So, the correct answer is: "Be constant".
Similar Questions
In the steady-state of the Solow-Swan model, growth in the capital stock is equal to:Group of answer choiceszero.depreciationpopulation growth plus depreciationpopulation growth
In the Solow-Swan model, the steady-state capital stock is a function ofQuestion 20AnswerSelect one:a.the initial capital stock, productivity, and the depreciation rate.b.the labor stock and the steady-state level of capital stock.c.productivity, the depreciation rate, the labor stock, and the saving rate.d.productivity and the initial capital stock.e.the initial capital stock, productivity, and the saving rate.
Consider a basic Solow–Swan model with constant labour force L and constant total factor productivity A. Suppose the saving rate is 𝑠=0.4 and the depreciation rate is 𝛿=0.1 . Suppose also that steady-state output per worker is 100. Steady state capital per worker is?
This question refers to the Solow–Swan model with constant technology. Imagine the model is in steady state and the population growth rate rises. As a result the steady-state level of real GDP per capita will:Group of answer choicesstay the samefallcan’t say because we need to know what will happen to the steady-state level of capital per person and, in the absence of that information, we can’t answer the questionrise
In the Solow model, steady-state equilibrium occurs when: A. Capital stock is decreasing over time B. Investment equals depreciation C. Output and consumption levels are equal D. Population growth rate is at its maximum
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.