Consider the Solow model with no technological progress. Assume that depreciation equals 0.20, population growth is 0.10, and that the capital-output ratio K/Y equals 0.7. Finally. assume that the savings rate is 30% (i.e. s-0.3). Then, the economy's steady state capital per worker is exactly at the Golden Rule level it is impossible to know whether the economy is at the Golden Rule level without more information the economy's steady state capital per worker is below the Golden Rule level the economy's steady state capital per worker is above the Golden Rule level
Consider the Solow model with no technological progress. Assume that depreciation equals 0.20, population growth is 0.10, and that the capital-output ratio K/Y equals 0.7. Finally. assume that the savings rate is 30% (i.e. s-0.3). Then, the economy's steady state capital per worker is exactly at the Golden Rule level it is impossible to know whether the economy is at the Golden Rule level without more information the economy's steady state capital per worker is below the Golden Rule level the economy's steady state capital per worker is above the Golden Rule level
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider the Solow model with no technological progress. Assume that depreciation equals 0.20, population growth is 0.10, and that the capital-output ratio K/Y equals 0.7. Finally,
assume that the savings rate is 30% (i.e. s-0.3). Then,
the economy's steady state capital per worker is exactly at the Golden Rule level
it is impossible to know whether the economy is at the Golden Rule level without more information
the economy's steady state capital per worker is below the Golden Rule level
the economy's steady state capital per worker is above the Golden Rule level
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