In the Solow model,if k = 8,y = 20,and s = 0.2,what is c?
A)24
B)20
C)16
D)12

Question

Quizplus · Accepted Answer

In the Solow model, the production function is given by Y = F(K, L), where K is the capital stock, L is the labor input, and Y is the output. The per capita output Y/L is equal to y = Y/L = F(K/L, 1). At the steady-state, the per capita output does not change over time. Therefore, we have that sF(K/L, 1) - (n+g)k = 0, where s is the savings rate, n is the population growth rate, and g is the technological progress rate. We are given that k = 8, y = 20, and s = 0.2. Therefore, we can solve for c = (1-s)y = (1-0.2)20 = 16.

In the Solow Model,if K = 8,y = 20,and S