Question

The input variables of a basic "Solow Model" of economic growth are: Physical Capital ("K"), Human Capital ("eL"), and, Ideas ("A") which help explain GDP, also referred to as our output variable ("Y"). For this problem, we hold "Human Capital" and "Ideas" constant such that out "Solow Model" reduces to Y=√K. Compute Y for this model when K equals 1,4,9, and 16. Select the answer that best describes the relationship between K (our capital input variable) and Y (our output variable). the amount of additional output ("Y") produced with each additional unit of capital ("K") increases; the marginal product of capital ("K") increases; the marginal product of capital increases the amount of additional output ("Y") produced with each additional unit of capital ("K") decreases; the marginal product of capital decreases the amount of additional output ("Y") produced with each additional unit of capital ("K") constant; the marginal product of capital constant based on the information given in the problem, unable to determine the answer?

Answer 1

The relationship between K (capital input) and Y (output) in the given Solow Model of economic growth is such that as the value of K increases, the value of Y also increases.

Step-by-step explanation:

In the given model, Y=√K. To compute Y for different values of K, we need to substitute the given values into the equation. When K equals 1, 4, 9, and 16, the corresponding values of Y are √1=1, √4=2, √9=3, and √16=4.

From these calculations, we can see that as the value of K increases, the value of Y also increases. This means that the amount of additional output (Y) produced with each additional unit of capital (K) increases, indicating a positive relationship between K and Y.