View the step-by-step solution to:


Question in black below and my answer is in red. My question to you is; did i cover all the talking

points with regard to what happens with rate of growth of output, output per worker and the capital stock?

1.    For an economy in which there is no technological progress, explain what must occur for the steady state to occur. Also explain what this implies about the rate of growth of output, output per worker, and the capital stock.

For an economy with no technological progress, the steady state will occur when per worker investment is equal to the worker depreciation.

The level of output depends on the amount of capital and capital accumulation depends on the level of output, which determines savings and investment. These interactions between capital and output imply that starting from any level of capital with no technological progress, an economy converges in the long run to a steady-state constant level of capital and associated with this level of capital is a steady-state level of output. The steady-state level of capital and thus steady-state level of output, depends positively on the saving rate. A higher saving rate leads to higher steady-state level of output. During the transition to the new steady state, a higher savings rate leads to positive output growth but with no technological progress, in the long run, the growth rate of output is equal to zero and so does not depend on the savings rate. 

Top Answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.


Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question