question archive In Solow's model of growth, what three processes cause the size of the labor force (L) and/or the supply of capital (K) to change between each pair consecutive periods? Under what conditions do they not change capital per worker (k = K/L)?
In Solow's model of growth, what three processes cause the size of the labor force (L) and/or the supply of capital (K) to change between each pair consecutive periods? Under what conditions do they not change capital per worker (k = K/L)?
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In Solow's model of growth, what three processes cause the size of the labor force (L) and/or the supply of capital (K) to change between each pair consecutive periods? Under what conditions do they not change capital per worker (k = K/L)?
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Answer for the first part:
a) Increase in the population growth rate leads to Increase in the size of the labor force.
b) Depreciation of Capital leads to fall in the amount of the Capital as it leads to wearing out of Capital.
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Step-by-step explanation
Answer for the first part:
a) Increase in the population growth rate leads to Increase in the size of the labor force.
b) Depreciation of Capital leads to fall in the amount of the Capital as it leads to wearing out of Capital.
(c) Increase in the saving rate increase the level of investment in the economy and thus increase capital per worker.
Answer for the second part:
Under what conditions do they do not change capital per worker(k= k/L) ?
Capital per worker will remain constant when both the capital and labor are either increasing or decreasing at the same rate in the economy. This keeps the capital per worker constant.
