Answer to Question #208501 in Macroeconomics for Siyani NTIMANE

Question

Use specifically the Solow growth model to discuss the implications of this pandemic
on the prospects of long-run economic growth for South Africa.

Answer 1

The steady state of Solow's growth model tends to be important for many reasons. The steady state tend to be the long-term equilibrium of the economy, showing that an economy that is in a steady state will maintain the current state, just as an economy that is not in a steady state be impacted. In addition, in the long-term stable state of the economy, the positive impact of per capita capital stock investment just exceeds the negative impact of population growth and capital devaluation. A key component of economic growth is investment as well as savings. In a steady state of population growth, every worker’s capital and output tend to be constant, including the savings rate. However, since the number of workers grows at a respective rate, the capital should similarly increase. Therefore, population growth assist in revealing the continued growth of total output. 

 The factors affected by the pandemic tend to be savings rate and investment incentives. Similarly, the size of the population will be affected, based on the idea that the pandemic will affect individuals who are in the most productive period. Human capital is an important factor in increasing total income and outcome, and it is similarly affected by the pandemic. Every factor is based on the Solow model, which often affects South Africa's long-term economic growth due to the pandemic. This is based on the idea that the pandemic has adversely affected investment and savings, including population growth, which is a factor in the Solow model.