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Questions › DSE › DSE 2021 › Q31
4 marks, −1Economics of Growth and Development › Harrod–Domar and Solow growth models › The golden ruleHardabout 3 min

DSE 2021 Question 31: Harrod–Domar and Solow growth models

Consider a hypothetical economy with aggregate production function F(L,K)=L2/3K1/3F(L,K) = L^{2/3}K^{1/3}F(L,K)=L2/3K1/3 and a 10 percent annual rate of depreciation. Find the 'golden rule' level of capital stock for this economy. (Notation: L,KL, KL,K denote labour and capital.)

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Consider a hypothetical economy with aggregate production function F(L,K) = L^(2/3)K^(1/3) and a 10 percent annual rate of depreciation. Find the 'golden rule' level of capital stock for this economy. (Notation: L, K denote labour and capital.) (A) (10/3)^(3/2) (B) 1/2 (C) (10/3)^(1/2) (D) (3/10)^(3/2)

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 golden rule, part of Harrod–Domar and Solow growth models in Economics of Growth and Development.

The saving rate that maximises consumption per worker in the steady state.

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Question from the DSE 2021 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.