Question10 In the Solow-Swan model, the steady-state level of output per worker is a function of productivity and the initial capital stock. the initial capital stock, productivity, and the depreciation rate. the initial capital stock, productivity, and the saving rate. productivity, the depreciation rate, and the saving rate. the initial capital stock and the steady-state level of capital stock. ResetMaximum marks: 1 Flag question undefined

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Question restatement: In the Solow-Swan model, the steady-state level of output per worker is a function of which factors?

Option 1: 'productivity and the initial capital stock.' This is incomplete. While productivity (A) matters for output per worker, the initial capital stock affects the path to steady state, not the steady-state level itself. The steady state depends on s, δ, and A, but not on where you started once you’ve converged.

Option 2: 'the initial capital stock, productivity, and the depreciation rate.' Here, initial capital stock again influences the transition path, not the long-run steady-state level. The depreciation rate δ does affect the steady state via the balance of investment and depreciation, but omitting the saving rate leaves out a crucial driver of the steady-state capital stock level.

Option 3: 'the initial capital stock, productivity, and the saving rate.' This option incorrectly assigns initial capital stock as a determinant of the steady-state level. The saving rate is important, and productivity is important, but the initial capital stock does not determine the steady-state level in the standard Solow model; it only affects the speed of convergence.

Option 4: 'productivity, the depreciation rate, and the saving rate.' This option aligns with the core Solow framework: the steady-state level of output per worker depends on productivity (A), since a higher A raises the production function output for any given capital per worker; the depreciation rate (δ) determines how much new investment must cover to keep capital per worker constant; and the saving rate (s) determines the amount of investment available to accumulate capital. All three play direct roles in determining the steady-state capital per worker and thus output per worker.

Option 5: 'the initial capital stock and the steady-state level of capital stock.' This is circular and tautological; it does not identify the true determinants (like A, δ, s) that set the steady-state level. The initial stock only affects the path, not the level, and the steady-state level is not defined by itself without the structural parameters.

In summary, only Option 4 correctly identifies the factors that shape the steady-state level of output per worker in the Solow-Swan model: productivity, the depreciation rate, and the saving rate. The other options either misattribute the role of initial capital stock (which affects dynamics, not the steady state) or omit key determinants like the saving rate or productivity.

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Over the last several decades the observed relationship between capital per worker and real-GDP per worker for the United States was linear. What is the most plausible explanation for this observation?

Question5 Ref. Solow-Swan Model. The steady state is defined as the point where capital accumulation, is equal to the depreciation rate. the saving rate. the population growth rate. zero. the productivity growth rate. ResetMaximum marks: 1 Flag question undefined

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