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Questions › GATE › GATE 2024 › Q56
2 marksEconomics of Growth and Development › Harrod–Domar and Solow growth models › The Solow model and its steady stateHardabout 3 min

GATE 2024 Question 56: Harrod–Domar and Solow growth models

Consider the Solow growth model in which output (YYY) is determined by the production function Yt=0.2Kt+0.8LtY_t=0.2K_t+0.8L_tYt​=0.2Kt​+0.8Lt​, where KKK and LLL denote capital and labour used in the production process, and ttt depicts time. The depreciation is given by δKt\delta K_tδKt​, where δ=0.2\delta=0.2δ=0.2. Saving is given by sYtsY_tsYt​, where s=0.5s=0.5s=0.5. Assume that the population does not grow with time. The steady state capital per unit of labour is ______ (in integer).

Answer and worked solution

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Plain-text version

Consider the Solow growth model in which output (Y) is determined by the production function Yₜ=0.2Kₜ+0.8Lₜ, where K and L denote capital and labour used in the production process, and t depicts time. The depreciation is given by δ Kₜ, where δ=0.2. Saving is given by sYₜ, where s=0.5. Assume that the population does not grow with time. The steady state capital per unit of labour is (in integer).

Also written as: Consider the Solow growth model in which output (Y) is determined by the production function Y_t=0.2K_t+0.8L_t, where K and L denote capital and labour used in the production process, and t depicts time. The depreciation is given by delta K_t, where delta=0.2. Saving is given by sY_t, where s=0.5. Assume that the population does not grow with time. The steady state capital per unit of labour is (in integer).

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…
Take this paper as a timed mockMore on The Solow model and its steady state

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