Sem 2

Question 1

Assumptions of the Solow model

Answer 1

countries produce and consume on homogenous good- not trade
Technology is exogenous

Question 2

Capital accumulation equation

Answer 2

K=sY-dK
or accumulation= gross investment- depreciation

Question 3

What do the Solow diagram curves represent

Answer 3

sy is investment per person
(n+d)k = amount of new investment per person required to keep the amount of capital per worker constant

Question 4

What does the difference in the two curves represent Solow diagram

Answer 4

The change in the amount of capital per worker.
When this is positive capital deepening is occurring
When this is 0 but actual stock is increasing this is capital widening (population growth)

Question 5

Capital deepening

Answer 5

An increase in capital per worker