Final answer:
In the Solow model, per-capita capital is determined by current savings, output, and depreciation relative to population growth. The steady state is when capital per capita remains constant, indicating no per capita growth. Convergence to steady state and slower growth rates can occur, and without changes to fundamentals, long-term growth rates stabilize.
Step-by-step explanation:
In a simple discrete time Solow model, the rule of motion for per-capita capital is derived from the equation of capital accumulation, which demonstrates how the capital stock evolves over time. The per-capita capital for the next period (k') is determined by the savings rate (s) multiplied by the output per capita as a function of this period's capital (f(k)), minus the depreciation of capital (delta) times this period's capital, all divided by the growth factor of the population (1 + n). The equation looks like this: k' = (s f(k) - δ k) / (1 + n).
The steady-state condition of the Solow model is achieved when the capital stock no longer changes, which occurs when the investment (savings) in new capital equals the amount that is being depleted by depreciation and the growth of the workforce. The math for the steady-state condition is s * f(k*) = (δ + n) * k*, where k* is the steady-state capital per capita. In this situation, per capita income and capital are no longer growing; they're just maintaining themselves.
Graphically, the steady-state can be illustrated in a diagram where the x-axis represents per-capita capital and the y-axis represents output, savings, and depreciation. The convergence to steady state occurs when capital stock below the steady state level grows and moves towards the steady state, while capital stock above it decreases, again moving towards the steady state. The rate of growth will be higher for economies further away from their steady state than for those closer to it, leading to the potential for economic convergence between countries if low-income countries grow faster than high-income ones.
If Turkish fundamentals remain unchanged, the implications are that growth rates over time will eventually stabilize. As per-capita capital approaches the steady state, the growth rate will decline until it reaches the point where it is only keeping pace with population growth and depreciation. This represents the long-term average rate of growth if there are no changes to savings rates, technology, or depreciation rates.