Limited access

Upgrade to access all content for this subject

Consider a Solow growth model with the following Cobb-Douglas production function for GDP:

$$Y = \bar AK^\alpha L^{1-\alpha}$$

...where $Y$ is GDP, $\bar A$ is the (constant)level of technology, $K$ is the capital stock and $L$ is the labor force. Let the savings rate by households be denoted $s$, and the rate of capital depreciation be denoted $\delta$. Also assume that the labor force grows at the fixed rate of $n$ each period.

In the steady state, the level of GDP and the capital stock both
Select Option increase at a rate greater than $n$increase at rate $n$increase at a rate less than $n$remain constantdecrease at a rate less than $n$decrease at rate $n$decrease at a rate greater than $n$
, while the level of GDP and capital per capita both
Select Option increase at a rate greater than $n$increase at rate $n$increase at a rate less than $n$remain constantdecrease at a rate less than $n$decrease at rate $n$decrease at a rate greater than $n$
.
Select an assignment template