In a steady state with population growth and technological progress:
A) the real rental price of capital is constant and the real wage grows at the rate of technological progress.
B) the real rental price of capital grows at the rate of technological progress and the real wage is constant.
C) both the real rental price of capital and the real wage grow at the rate of technological progress.
D) both the real rental price of capital and the real wage are constant.

Question

Quizplus · Accepted Answer

In a steady state with population growth and technological progress, the real rental price of capital remains constant because the capital stock is growing at the same rate as the population. However, the real wage grows at the rate of technological progress because workers are becoming more productive due to technological advancements. Therefore, choice A is the correct answer.

In a Steady State with Population Growth and Technological Progress