Questions

Differentiate between the steady state level of capital per worker and the golden rule level; of capital per worker. Why does s* become important, to present and future generations?

In the SGM, how does the saving rate affect the steady-state level of income? How does it affect the steady-state rate of growth?

Explain the political barriers to achieving the golden rule level of capital per worker.

How is population growth analyzed in the SGM? What is the correlation between population growth and the level of capital per worker in this model?

In the Solow growth model,how does the rate of population growth affect the steady-state level of income? How does it affect the steady-state rate of growth?

Define the efficiency of labor in the SGM. How does this affect the model? What is g?

Many demographers predict that the United States will have zero population growth in the twenty-first century, in contrast to average population growth of about 1 percent per year in the twentieth century. Use the Solow model to forecast the effect of this slowdown in population growth on the growth of total output and the growth of output per person. Consider the effects of both the steady state and the transition between steady states.