Ukraine recovery: After the war, Ukraine's capital stock declines. Choose one scenario that cannot be explained from a Solow model. For simplicity, consider a Solow model with constant population and productivity.(a) The interest rate after the war ends is higher than in the steady state, but then declines.(b) Capital per capita grows rapidly until it reaches a steady state and then continues to grow at a constant rate after it converges to a steady state.(c) Real GDP grows, but its growth rate decreases gradually. After it converges to the steady state, it stops growing.(d) The growth rate of real GDP will never be negative.
Ukraine recovery: After the war, Ukraine's capital stock declines. Choose one scenario that cannot be explained from a Solow model. For simplicity, consider a Solow model with constant population and productivity.(a) The interest rate after the war ends is higher than in the steady state, but then declines.(b) Capital per capita grows rapidly until it reaches a steady state and then continues to grow at a constant rate after it converges to a steady state.(c) Real GDP grows, but its growth rate decreases gradually. After it converges to the steady state, it stops growing.(d) The growth rate of real GDP will never be negative.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Ukraine recovery: After the war, Ukraine's capital stock declines. Choose one scenario that cannot be explained from a Solow model. For simplicity, consider a Solow model with constant population and productivity.
(a) The interest rate after the war ends is higher than in the steady state, but then declines.
(b) Capital per capita grows rapidly until it reaches a steady state and then continues to grow at a constant rate after it converges to a steady state.
(c) Real
(d) The growth rate of real GDP will never be negative.
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