In this same Solow economy, you observe that GDP grows at a rate of 2.7 percent per year. Based on this information you know that the economy is _______.

Question

BlackTom AI · Accepted Answer

In the Solow model the steady-state aggregate output growth rate equals n + g (population growth plus technological progress). Key knowledge: actual GDP growth Δln Yt can be decomposed into the steady components plus the change in output per effective worker: Δln Yt = n + g + Δln yt, where yt = Y/(A·L) is output per effective worker. 1) Relevant concepts - Steady state: yt and capital per effective worker kt are constant, so Δln yt = 0 and aggregate output grows at n + g. - Transition dynamics: if yt is falling (Δln yt < 0) the economy is above the steady-state capital per effective worker and is converging down; if yt is rising (Δln yt > 0) it is below the steady state and converging up. 2) Step-by-step reasoning - Start from the identity: Δln Y = n + g + Δln y. - Rearranging: Δln y = Δln Y − (n + g). - Observe reported Δln Y = 2.7% = 0.027. 3) Intermediate algebraic step - Δln y = 0.027 − (n + g). 4) Interpretation and conclusion - If Δln y < 0 then yt is declining, so capital per effective worker is above its steady-state level and the economy is converging to the steady state from above. - The question’s correct answer presumes (from the model’s parameters or prior context) that the steady-state aggregate growth rate n + g exceeds 2.7%. Therefore Δln y = 0.027 − (n + g) < 0, implying convergence from above. 5) Why other possibilities are incorrect - “At the steady state” would require Δln Y = n + g (so Δln y = 0); since observed growth is different (lower), the economy is not at the steady state. - “Converging from below” would require Δln Y > n + g (so Δln y > 0), which contradicts the observed Δln Y being smaller than n + g. - “Diverging” is inconsistent with the Solow model’s stable steady state for standard parameter values (capital per effective worker is stable and converges). 6) Final confirmation Because observed GDP growth (2.7%) is below the steady-state growth rate (n + g), Δln y < 0 and the economy is converging to its steady state from above. This confirms the provided answer: is converging to its steady state from above.

In this same Solow economy, you observe that GDP grows at a rate of 2.7 percent per year. Based on this information you know that the economy is _______.单项选择题

类似问题

In the Solow model with no population growth (i.e., L is fixed), a rise in [ Select ] the depreciation rate the level of productivity leads to a higher steady-state capital stock, and a drop in [ Select ] the saving rate the depreciation rate leads to a lower steady-state capital stock.

An increase in leads to a higher steady-state capital stock, and a decline in leads to a lower steady-state capital stock.

Let 𝑠 ¯ be the investment rate, 𝛿 the depreciation rate, 𝐴 ¯ aggregate productivity (or TFP), 𝐿 ¯ the population, and 𝛼 the exponent on capital in the production function of a Solow economy. What is the steady-state level of investment per person 𝑖 ∗ ?

In the Solow model with population growth rate 𝑛 ¯ = 3 % , you know that total GDP grows at a rate of ________ percent in steady state.

Using the Solow model, if, in time 𝑡 = 0 , the initial capital stock is 𝐾 0 = 100 , investment is 𝐼 0 = 25 , and 𝑑 ¯ = 0.1 is the depreciation rate, capital accumulation from period 0 to period 1, i.e., Δ 𝐾 1 is:

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