Question

33. Assume a production function, Y = KαL1 – α.. Assume constant population growth (n). In the Solow model, the steady-state level of output per worker is a function of:

    1. productivity.

    2. population, the depreciation rate, and the saving rate.

    3. poverty, productivity, and the saving rate.

    4. poverty, productivity, and the depreciation rate.

    5. poverty and the steady-state level of capital stock.

35. In the Solow model, it is assumed that a(n) __________ fraction of capital depreciates regardless of the
capital stock.

a. increasing
b. constant
c. decreasing
d. undetermined
e. none of the above

Answer 1

Ans.35- Constant

Solow model takes depreciation rate as constant i.e. a constant fraction of capital depreciates each year.

Solow model takes rate of technological progress , saving rate, depreciation rate as exogenous. It doesn't try to explain these factors.