Skip to content
We use only essential cookies to keep you signed in and remember your preferences. See our Cookie Policy.
TestStop
MocksPracticeResourcesIndiaBlogPricing
Sign in
Questions › DSE › DSE 2018 › Q23
4 marks, −1Economics of Growth and Development › Harrod–Domar and Solow growth models › The Solow model and its steady stateModerateabout 2 min

DSE 2018 Question 23: Harrod–Domar and Solow growth models

Consider a Solovian economy with aggregate production function Yt=Kt1/2Nt1/2Y_t = K_t^{1/2} N_t^{1/2}Yt​=Kt1/2​Nt1/2​. The population is 100100100 (no growth) and the initial capital stock is 999. Output is distributed to households as factor incomes; they consume half their income and save the rest, and all savings are invested. There is 100%100\%100% depreciation of capital within one period. The corresponding steady-state value of aggregate output is

Tap an option to check your answer.

Answer and worked solution

Checking your account…

Plain-text version

Consider a Solovian economy with aggregate production function Yₜ = Kₜ^(1/2) Nₜ^(1/2). The population is 100 (no growth) and the initial capital stock is 9. Output is distributed to households as factor incomes; they consume half their income and save the rest, and all savings are invested. There is 100% depreciation of capital within one period. The corresponding steady-state value of aggregate output is (A) 30 (B) 50 (C) 5 (D) 10

Also written as: Consider a Solovian economy with aggregate production function Y_t = K_t^(1/2) N_t^(1/2). The population is 100 (no growth) and the initial capital stock is 9. Output is distributed to households as factor incomes; they consume half their income and save the rest, and all savings are invested. There is 100% depreciation of capital within one period. The corresponding steady-state value of aggregate output is

Harrod–Domar and Solow growth models has come up 113 times in 7 exams since 2006.

What this question tests

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.

TestStop has 38 past-paper questions on this subtopic; the nearest in year are below.

  • IIT JAM 2022 · Q14An economy follows the Solow model with production function y = √k, where y is output per worker and k is…
Practise Harrod–Domar and Solow growth modelsMore on The Solow model and its steady state

Similar questions from other papers

  • CUET-PG 2026 · Q69Match the LIST-I with LIST-II. List I A. Harrod-Domer Model B. Solow Model C. Golden rule of capital stock D. Steady state. List II I. g=s/v II. MRK = ∂ III. k…
  • GATE 2026 · Q50Consider a Solow growth model with the production function Yₜ=Kₜ^α Nₜ^(1-α); 0<α<1; where, Yₜ is aggregate output at time t; Kₜ is aggregate capital stock at time t; Nₜ…
  • IIT JAM 2026 · Q57For a closed economy: Sₜ=aYₜ and Iₜ=g(Yₜ-Yₜ₋₁), where Sₜ, Yₜ and Iₜ are savings, income and investment in period t, and a and g are positive constants. For Y₀=100…
  • UGC-NET 2026 · Q3Which of the following assumption is NOT similar in Harrod and Domar Model?
  • CUET-PG 2025 · Q17Which of the following is not correct about the steady state equilibrium for the economy according to neoclassical growth theory?

Question from the DSE 2018 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.