In the Solow growth model with population growth, but no technological progress,
ID: 2439357 • Letter: I
Question
In the Solow growth model with population growth, but no technological progress, the steady-state amount of investment can be thought of as a break-even amount of investment because the quantity of investment just equals the amount of:
output needed to achieve the maximum level of consumption per worker.
capital needed to replace depreciated capital and to equip new workers.
saving needed to achieve the maximum level of output per worker.
output needed to make the capital per worker ratio equal to the marginal product of capital.
output needed to achieve the maximum level of consumption per worker.
capital needed to replace depreciated capital and to equip new workers.
saving needed to achieve the maximum level of output per worker.
output needed to make the capital per worker ratio equal to the marginal product of capital.
Explanation / Answer
Answer: B
Under the Solow growth model with no technological progress, the steady state level of investment equals the amount the replaces the depreciated capital. Also, the investment maintains the capital-labor ratio due to population growth.