If sA s + n in the model with constant average product of capital, the long run growth rate is:
A)constant.
B)positive
C)negative.
D)cyclical.

Question

If sA > s  + n in the model with constant average product of capital, the long run growth rate is:
A)constant. 
B)positive 
C)negative. 
D)cyclical.

Quizplus · Accepted Answer

According to the Solow model with constant average product of capital, the long run growth rate of output per worker depends on the technological progress parameter (A) and the population growth rate (n). The equation for steady-state output per worker is y* = (sA/(n+δ))^(1/1-α), where δ is the depreciation rate of capital and α is the share of capital in output.

If sA > s11eb7ff0_af80_46cb_8992_c52fe02aec87_TB8790_11 + n, then the steady-state output per worker is higher than the initial level of output per worker. This means that the economy will experience positive long-run growth in output per worker. Therefore, the answer is B.

If SA > S + N in the Model