Tuesday, April 8, 2008

Test Question?

From chapter 8:

Assume that the long-term growth rate of the economy is 5% a year, MPK = 6%, and the depreciation rate of capital is 2%. According to the Solow growth model,
A. the level of saving in the economy is such that the current levels of capital per worker are less than future generations' levels of capital per worker.
B. the level of saving in the economy is such that the current levels of capital per worker are more than future generations' levels of capital per worker.
C. future generations will be better off then the current generation.
D. future generations will be worse off than the current generation.
E. A and C

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