In a steady-state economy with population growth n and labor-augmenting technological progress g, persistent increases in standards of living are possible because the:
A)capital stock grows faster than does the labor force.
B)capital stock grows faster than does the number of effective
C)workers. rate of depreciation constantly decreases.
D)saving rate constantly increases.

Question

Quizplus · Accepted Answer

In a steady-state economy, the capital stock and labor force grow at the same rate, which is equal to the population growth rate. However, if the economy experiences labor-augmenting technological progress (g), then the productivity of each worker will increase, which will lead to an increase in output per capita and an increase in standards of living. This increase in productivity can effectively offset the population growth rate (n) and result in persistent increases in standards of living. Since capital accumulation is also an important driver of economic growth, if the capital stock grows faster than the labor force, it can further enhance the effects of technological progress and contribute to sustained increases in standards of living. Therefore, option A is the correct choice.

In a Steady-State Economy with Population Growth N and Labor-Augmenting