In an economy, aggregate output is produced from capital and labour via , with . Both factors are fully employed; each worker is paid a wage and each unit of capital a rental . A constant proportion of output is saved and invested each period, augmenting next period's capital (no depreciation). The labour force grows at a constant rate .
The dynamic equation for capital accumulation per worker is given by:
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In an economy, aggregate output is produced from capital K and labour L via Yₜ=α Kₜ+β Lₜ, with α,β>0. Both factors are fully employed; each worker is paid a wage β and each unit of capital a rental α. A constant proportion s of output is saved and invested each period, augmenting next period's capital (no depreciation). The labour force grows at a constant rate n. The dynamic equation for capital accumulation per worker is given by: (A) dk/dt=sβ kₜ^α-nkₜ (B) dk/dt=sα kₜ+sβ-nkₜ (C) dk/dt=sα kₜ-nkₜ (D) dk/dt=sα kₜ^β-nkₜ
Also written as: In an economy, aggregate output is produced from capital K and labour L via Y_t=alpha K_t+beta L_t, with alpha,beta>0. Both factors are fully employed; each worker is paid a wage beta and each unit of capital a rental alpha. A constant proportion s of output is saved and invested each period, augmenting next period's capital (no depreciation). The labour force grows at a constant rate n. The dynamic equation for capital accumulation per worker is given by:
Harrod–Domar and Solow growth models has come up 113 times in 7 exams since 2006.
This question is on The Solow model and its steady state, part of Harrod–Domar and Solow growth models in Economics of Growth and Development.
Growth with substitutable factors: capital per worker settles where saving covers depreciation and dilution.
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Question from the DSE 2013 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.