In the Solow growth model, the economy converges to a steady-state level of capi
ID: 1227305 • Letter: I
Question
In the Solow growth model, the economy converges to a steady-state level of capital:
multiple choice
Regardless of the starting level of capital.
Only if it starts from a level of capital below the steady-state level.
Only if it starts from a level of capital above the steady-state level.
Only if it starts from a steady-state level of capital.
1)Regardless of the starting level of capital.
2)Only if it starts from a level of capital below the steady-state level.
3)Only if it starts from a level of capital above the steady-state level.
4)Only if it starts from a steady-state level of capital.
Explanation / Answer
Ans: Regardless of the starting level of capital
Explanation: According to Solow's model what ever may be the level of capital initially, it converges to a steady state level. In steady state, capital, loutput and consumption ,etc are all constant and growth stops.