Ten economies have all reached a steady state.According to the Solow growth model,which of the following is true?
A) They all have the same level of real gross domestic product (GDP).
B) They all have the same level of real gross domestic product (GDP)per capita.
C) They are all growing at the same positive rate.
D) Investment in each of these economies is equal to zero.
E) They all have the same rate of depreciation.

Question

Quizplus · Accepted Answer

The Solow growth model predicts that in the steady state, all economies will have the same level of real GDP per capita. This is because as capital accumulation continues, the marginal product of capital decreases, offsetting the positive impact of increasing capital on output. Thus, all economies will converge to the same level of output per worker in the long run.

Ten Economies Have All Reached a Steady State