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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BlackTom AI · Accepted Answer

To analyze what the steady state means in the Solow-Swan framework, we must look at what happens to capital over time when the economy stops accumulating net capital.
Option 1: the depreciation rate. In many presentations of the Solow-Swan model (especially in simplified textbook versions), the steady state is reached when investment exactly compensates depreciation, so net capital accumulation is zero. In such a setup, the amount of saving converted into investment equals δK, i.e., investment offsets the loss of capital from wear and tear. This aligns with the statement that at the steady state capital accumulation is equal to depreciation.
Option 2: the saving rate. While the saving rate determines how much output is saved and hence how much investment occurs, it is a parameter that shapes the location of the steady state (the steady-state capital stock and output), not the defining condition itself. The steady state is about a balance between investment and depreciation, not a description of the saving rate alone.
Option 3: the population growth rate. Population growth changes the effective depreciation per capita and the dynamics of per-capita variables, but the fundamental steady-state condition in the simplest formulation is about investment equaling depreciation. Growth rates influence the path and the per-capita levels, not the basic balance that defines the steady state as a zero net capital accumulation point.
Option 4: zero. Zero as a condition would imply no investment needed to replace depreciation, which is inconsistent with the idea of preserving the capital stock over time. In the Solow-Swan framework, if there were zero investment, capital would decline due to depreciation, so steady state would not occur at zero investment.
Option 5: the productivity growth rate. Productivity growth affects the level of output and the dynamics of the economy, but the standard steady-state balance is about investment and depreciation, not directly about the rate of productivity growth itself. In growth-adjusted versions, you might incorporate g into a broader condition, but the core definition given here centers on depreciation.
Thus, when evaluating each option against the typical steady-state condition of equalizing investment with depreciation, option 1 stands as the correct interpretation, while options 2–5 misidentify the defining balance or introduce factors that influence, but do not define, the steady-state condition.

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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