In the steady-state of the Solow-Swan model, growth in the capital stock is equal to:Group of answer choiceszero.depreciationpopulation growth plus depreciationpopulation growth
Question
In the steady-state of the Solow-Swan model, growth in the capital stock is equal to:Group of answer choiceszero.depreciationpopulation growth plus depreciationpopulation growth
Solution
In the steady-state of the Solow-Swan model, growth in the capital stock is equal to zero.
Here's why:
The Solow-Swan model is a model of long-run economic growth. In the steady state of this model, the capital stock (the total amount of capital in the economy) does not change. This is because the amount of new capital being added to the economy (through investment) is exactly balanced by the amount of capital being lost (through depreciation).
So, in the steady state, the growth rate of the capital stock is zero. This is because the capital stock is not growing or shrinking, but is staying the same.
Therefore, the correct answer to your question is: "zero".
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