The Solow model tells us that if countries have the access to the same technology and they accumulate new technology at identical rates, then any differences in per capita real output must be due to:

Question

Quizplus · Accepted Answer

The Solow model explains that differences in per capita output can be attributed to differences in the variables that determine the steady state, such as δ (depreciation rate of capital), σ (share of income saved), and n (growth rate of population). Therefore, choice A is the best answer. Choice B is incorrect because the Solow model assumes that countries have access to the same technology. Choice C is incorrect because the Golden Rule level of saving is a hypothetical concept that represents the savings rate that maximizes consumption in the long-run, and it does not necessarily reflect differences in per capita output between countries. Choice D is also incorrect because the Solow model explains that differences in per capita output can exist between countries.

The Solow Model Tells Us That If Countries Have the Access