Use the following information to answer the question(s) below:
6 = 0.13
gA = 0.05
gN = 0.04
-Given the information above, the steady state rate of growth of output is:
A) 4%.
B) 9%.
C) 5%.
D) 22%.
E) 0%.

Question

Quizplus · Accepted Answer

The steady state rate of growth of output can be calculated using the formula for the Solow growth model: gY = gA + (α/1-α) * gN, where gY is the growth rate of output, gA is the growth rate of technology, and gN is the growth rate of labor (or population). Given gA = 0.05 and gN = 0.04, and assuming α = 0.3 (a common assumption for the share of capital in income, not directly given but can be inferred or assumed for calculation purposes), we get gY = 0.05 + (0.3/0.7) * 0.04 = 0.05 + 0.0171 = 0.0671 or approximately 6.71%. However, without the explicit value of α, the direct calculation from the given information is not possible. The question seems to imply a direct relationship or a mistake in the premise as none of the calculations with the standard Solow model formula directly lead to the options provided. Given the options and the typical interpretation of growth rates in a simplified model, the closest reasonable assumption based on typical economic growth interpretations would be to add the growth rates of technology and labor, which inaccurately but for the sake of matching options, gives 0.05 + 0.04 = 0.09 or 9%. This approach, however, is not standard economic theory and the correct method involves more information than provided.

Use the Following Information to Answer the Question(s) Below