In the Solow model,the steady-state capital-labor ratio will decline if
A)the saving rate per worker increases.
B)the consumption rate per worker declines.
C)population growth increases.
D)productivity increases.

Question

Quizplus · Accepted Answer

According to the Solow model, the steady-state capital-labor ratio is determined by the saving rate, the population growth rate, and the depreciation rate. If population growth increases, the steady-state capital-labor ratio will decline because the amount of capital per worker is decreasing as population grows faster than capital accumulation. Therefore, C is the correct answer. A, B, and D are incorrect.

In the Solow Model,the Steady-State Capital-Labor Ratio Will Decline If