Figure 4.1
Determinants
of k/k
-In Figure 4.1, if the population growth rate increases, then:
A)s•(y/k) increases.
B)K/L moves away from the optimum.
C)s + n increases.
D)the initial amount of labour increases.

Question

Figure 4.1
Determinants
of  k/k 
-In Figure 4.1, if the population growth rate increases, then:
A)s•(y/k) increases. 
B)K/L moves away from the optimum. 
C)s + n increases. 
D)the initial amount of labour increases.

Quizplus · Accepted Answer

According to the Solow growth model depicted in Figure 4.1, an increase in population growth rate (n) leads to an increase in the depreciation rate (δ = n+s) and a shift in the steady-state capital-labor ratio (k/L) away from the optimal level (k*/L), resulting in a decrease in output per capita (y/L). Therefore, option C is the correct answer as it reflects the impact of population growth on the economy.

Figure 4.1 Determinants