In the Solow growth model, the assumption of constant returns to scale means that:
A) all economies have the same amount of capital per worker.
B) the steady-state level of output is constant regardless of the number of workers.
C) the saving rate equals the constant rate of depreciation.
D) the number of workers in an economy does not affect the relationship between output per worker and capital per worker.

Question

Quizplus · Accepted Answer

The assumption of constant returns to scale means that doubling both capital per worker and number of workers will double the output per worker. Therefore, the number of workers in an economy does not affect the relationship between output per worker and capital per worker.

In the Solow Growth Model, the Assumption of Constant Returns