Answer to Question #151881 in Macroeconomics for Bamuu Bugila Abdul Jalilu

Question

1). The balanced growth path of the Solow model with positive technological progress features
A. an increasing ratio of the labour stock to GDP
B. a constant ratio of the capital stock to GDP
C. a decreasing ratio of the capital stock to GDP
D. a constant ratio of the labour stock to GDP
2). The balanced growth path of the Solow model with positive technological progress features
A. a decreasing marginal product of labour
B. a constant marginal product of labour
C. an increasing marginal product of labour
D. a constant average product of labour
3). In the Solow model the golden rule level of capital per efficient worker is
A. that all the labour income is consumed
B. when the marginal product of capital is equal to the saving rate
C. when the output elasticity with respect to capital is equal to zero
D. that maximises consumption per efficient worker in every point in time

Answer 1

1). The balanced growth path of the Solow model with positive technological progress features:

B. a constant ratio of the capital stock to GDP because at balanced growth path, capital stock remains same

2). The balanced growth path of the Solow model with positive technological progress features

A. a decreasing marginal product of labourbecause a unit increase of labour will lead to a decrease in labour required

3). In the Solow model the golden rule level of capital per efficient worker is:

D. that maximises consumption per efficient worker in every point in time

This is to ensure efficient resource allocation