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Questions › JNU › JNU SIS 2021 › Q23
0 marksEconomics of Growth and Development › Harrod–Domar and Solow growth models › The Solow model and its steady stateHardabout 3 min

JNU SIS 2021 Question 23: Harrod–Domar and Solow growth models

Consider two countries, A and B. In both the countries, the production function is given by a Cobb-Douglas technology: Y=AK13L23Y = AK^{\frac{1}{3}}L^{\frac{2}{3}}Y=AK31​L32​, where KKK and LLL are physical capital and labour. Further, in both countries, the growth rate of labor force is 0.1 per period, physical capital depreciates at the rate 0.1 per period, and A=1A = 1A=1. The saving rates differ between countries: sA=0.2s_A = 0.2sA​=0.2 in country A and sB=0.4s_B = 0.4sB​=0.4 in country B. Then, the steady state level of capital-labor ratio (K/LK/LK/L) in the two countries will be:

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Consider two countries, A and B. In both the countries, the production function is given by a Cobb-Douglas technology: Y = AK^(1/3)L^(2/3), where K and L are physical capital and labour. Further, in both countries, the growth rate of labor force is 0.1 per period, physical capital depreciates at the rate 0.1 per period, and A = 1. The saving rates differ between countries: s_A = 0.2 in country A and s_B = 0.4 in country B. Then, the steady state level of capital-labor ratio (K/L) in the two countries will be: (A) (K/L)_A = 2, (K/L)_B = 1 (B) (K/L)_A = 1, (K/L)_B = 2^(3/2) (C) (K/L)_A = 1, (K/L)_B = 2 (D) (K/L)_A = 2^(3/2), (K/L)_B = 2^(2/3)

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.

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