In the Solow–Swan model, a decrease in the rate of population growth will have what effect on the steady-state level of real GDP per capita?Group of answer choicesIncreaseDecreaseNo change in real GDP per capita because although it does change the rate at which output and population are growing, it will make both growth rates change by the same amount and so the output-population ratio will be unchangedNo change in real GDP per capita because although it does change the level of labour, the level of capital will change to keep the capital-labour ratio the same as before
Question
In the Solow–Swan model, a decrease in the rate of population growth will have what effect on the steady-state level of real GDP per capita?Group of answer choicesIncreaseDecreaseNo change in real GDP per capita because although it does change the rate at which output and population are growing, it will make both growth rates change by the same amount and so the output-population ratio will be unchangedNo change in real GDP per capita because although it does change the level of labour, the level of capital will change to keep the capital-labour ratio the same as before
Solution 1
In the Solow-Swan model, a decrease in the rate of population growth will increase the steady-state level of real GDP per capita. This is because the model assumes that capital per worker and technology are constant in the long run. Therefore, if the population (and thus the number of workers) grows at a slower rate, the amount of capital per worker increases, leading to an increase in output per worker or real GDP per capita.
Solution 2
In the Solow-Swan model, a decrease in the rate of population growth will increase the steady-state level of real GDP per capita. Here's why:
The Solow-Swan model is a model of long-run economic growth. It suggests that economic growth is a function of capital accumulation, labor growth (population growth), and technological progress.
In this model, a decrease in population growth means that there are fewer people to divide the total output (GDP) among. Therefore, all else being equal, the amount of output per person (real GDP per capita) will increase.
This is because the model assumes that capital will adjust to restore the capital-labor ratio, meaning that the amount of capital per worker remains constant. So, if there are fewer workers (due to lower population growth), then each worker has more capital to work with, which increases productivity and, therefore, real GDP per capita.
So, the correct answer is: Increase.
Solution 3
In the Solow-Swan model, a decrease in the rate of population growth will increase the steady-state level of real GDP per capita. Here's why:
The Solow-Swan model is a model of long-run economic growth. It suggests that economic growth is a function of capital accumulation, labor growth (population growth), and technological progress.
In this model, a decrease in population growth means that there are fewer people to divide the total output (GDP) among. Therefore, all else being equal, the amount of output per person (real GDP per capita) will increase.
This is because the model assumes that capital will adjust to restore the capital-labor ratio, meaning that the amount of capital per worker remains constant. So, if there are fewer workers (due to lower population growth), then each worker has more capital to work with, which increases productivity and, therefore, real GDP per capita.
So, the correct answer is "Increase".
Similar Questions
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