If an economy is growing at 2 percent a year but its rate of technology growth is 1 percent a year,then this country must be:

Question

Quizplus · Accepted Answer

The Solow growth model states that a country's long-run steady state level of output per worker depends on its rate of technological progress and its level of capital per worker. If the rate of technological progress is lower than its population growth rate, the economy will eventually reach a steady state level of output per worker that is lower than what it would be if the rate of technological progress were higher. In this case, the economy is growing at 2 percent a year and its rate of technology growth is 1 percent a year, which means that it is expected to grow slower in the future. This is because the rate of technological progress is not keeping up with the population growth rate, which will lead to a lower level of capital per worker in the long run. Therefore, B is the correct choice.

If an Economy Is Growing at 2 Percent a Year