When the capital-output ratio is at its steady state value, the total economy-wide capital stock is growing at the rate
A) n + g.
B) n - g.
C) n x g.
D) n / g.

Question

Quizplus · Accepted Answer

In the context of the Solow growth model, when the capital-output ratio is at its steady state, the total economy-wide capital stock grows at the rate of $n + g$, where $n$ represents the growth rate of the population (or labor force) and $g$ represents the growth rate of technology. This ensures that the capital per worker and output per worker grow at the rate of technological progress, allowing for steady-state growth in per capita income.

When the Capital-Output Ratio Is at Its Steady State Value