Question

In the Solow model, how does a decrease in the rate of population growth n affect the steady-state value of each of the following variables? Increases Decreases Stays the same a. The savings rutes d. The capital output ratio ky b. Capital stock pet worker e. The manpinal product of capital MPK c. Output per workery 1. The growth of output per workery R. The growth rate of total output Anwer Bank

Answer 1

In the Solow model, a decrease in the rate of population growth affects different variables in different ways. The savings rates increase, the capital stock per worker increases, the marginal product of capital increases, and the output per worker increases.

Step-by-step explanation:

In the Solow model, a decrease in the rate of population growth, n, affects the steady-state value of each of the following variables as follows:

1. The savings rates (r) increase, as there are fewer people to save for, resulting in higher savings per capita.
2. The capital output ratio (ky) stays the same, as it is determined by the capital-output relationship and not directly affected by population growth.
3. The capital stock per worker increases, as the decrease in population growth leads to a higher capital per worker ratio.
4. The marginal product of capital (MPK) increases, as the decrease in population growth leads to more capital available per worker, resulting in higher output per unit of capital.
5. Output per worker (y) increases, as the decrease in population growth leads to a higher capital per worker ratio, which increases productivity.
6. The growth rate of output per worker (G) stays the same, as it is determined by the rate of technological progress and not directly affected by population growth.

Answer 2

The way that decrease in the rate of population growth (n) affects the steady-state value of each variable in the Solow model are:

1. Capital stock per worker (k-) Increases
2. Output per worker (y) -Increases
3. The marginal product of capital (MPK) -Increases
4. The growth rate of total output (Y) -Decreases
5. The capital-output ratio (k/y) -Decreases
6. The savings rate (s)- Stays the same

In terms of lower population growth rate, there are fewer new workers entering the workforce each year. This means that there is more capital available for each worker, leading to an increase in the capital stock per worker.

So, one can say that Increased capital per worker can lead to higher output per worker, as workers have more resources to work with. This is because capital is a key factor in production, and more capital can enhance the productivity of workers.