In the Solow growth model, if investment exceeds depreciation, the capital stock

Question

In the Solow growth model, if investment exceeds depreciation, the capital stock will and output will until the long run equilibrium is attained a) increase: increase (b) increase; decrease (c) decrease; decrease (d) decrease; increase Suppose the demand for oil in Alaska is given by 8-0.4q while the supply is 2. Alaska only consumes its oil and the stock of oil is equal to 20 barrels for two years. If the interest rate is 10% , the government of Alaska will extract (a) = 5 and X2 = 15 (b) X1 = 15 and X2 = 5 (c) = 12.039 and X2 = 7.961 (d) , = 11.278 and X2 = 8.722 (e) None of the above Consider a Solow Growth Model with no population growth and no technological progress. Final goods and services (Y) are produced using technology (A), machines (K), and workers (L) using the following production technology: YAKL-. If a country, say the US, decides to invest half of the total output, the growth rate in the US is: (a) falling (b) falling only if we account for the value of land. (c) rising (d) rising only if we account for the value of land (e) None of the above

Explanation / Answer

In the Solow growth model, if investment exceeds depreciation, it will be used to build up more capital hence, the capital stock will increase and output will thus, increase until the steady state is attained.

Option (a) increase; increase

Note: one full question at a time

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