Assume that an economy experiences both positive population growth and technological progress.Once the economy has achieved balanced growth,we know that the capital stock is
A)constant.
B)growing at a rate of gA.
C)growing at a rate of gN.
D)growing at a rate of gA + gN.
E) none of the above

Question

Quizplus · Accepted Answer

Balanced growth means that all of the sources of growth in the economy are growing at the same rate. In this case, we have positive population growth, which means the labor force (N) is growing at a rate of gN. We also have technological progress, which means that productivity (A) is growing at a rate of gA. The only way for the economy to achieve balanced growth is for the capital stock (K) to also be growing at a rate of gA + gN to maintain the equilibrium between the factors of production. Therefore, the correct answer is D.

Assume That an Economy Experiences Both Positive Population Growth and Technological