Question4 The key insight in the Solow-Swan model is that the relationship between capital and output is static. capital accumulation contributes to economic growth. savings have no impact on economic growth. saving rates are determined in a particular manner. capital depreciation enhances economic growth. ResetMaximum marks: 1 Flag question undefined

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BlackTom AI · Accepted Answer

Let's break down what the Solow-Swan model emphasizes in relation to the question.
Option 1: 'the relationship between capital and output is static.' In the Solow-Swan framework, capital accumulation directly affects output through the production function, and the dynamic story revolves around how investment translates into capital stock and hence output over time. Describing the relationship as static ignores the dynamic capital accumulation process, so this statement is misleading.
Option 2: 'capital accumulation contributes to economic growth.' This captures the core mechanism: when saved resources are invested, the capital stock grows, which raises output (up to the steady-state) and drives growth during the adjustment period. The model shows how investment in capital translates into higher output until the economy converges to its steady state.
Option 3: 'savings have no impact on economic growth.' In the Solow model, saving is the source of investment, and investment is what changes the capital stock. If savings did not affect growth, there would be no link from saving behavior to output dynamics, which contradicts the model’s fundamental channel.
Option 4: 'saving rates are determined in a particular manner.' While the model sometimes assumes exogenous saving behavior, the key insight isn’t about how saving rates are determined; it’s about how capital accumulation from those savings affects output over time. This statement describes a peripheral detail, not the central mechanism the question asks about.
Option 5: 'capital depreciation enhances economic growth.' Depreciation reduces the effective capital stock and typically slows growth unless offset by investment. It does not enhance growth; it is a cost that must be financed by investment to maintain or grow the capital stock.
In summary, the most accurate depiction of the Solow-Swan insight among the options is that capital accumulation contributes to economic growth, since investment-driven capital stock changes drive output changes during the transition to the steady state, whereas the other statements either misunderstand the dynamics, misstate the causal links, or mischaracterize the role of depreciation and saving.

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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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