Considering the Solow model, what will be the effect of an immediate doubling of the size of the...
Considering the Solow model, what will be the effect of an immediate doubling of the size of the labour force on GDP per capita? What is the effect in the long run?
Solow Growth Model:
The Solow Growth model is a neoclassical model of economic growth developed by economist and Nobel Prize laureate Robert Solow. The model describes the dynamics of an economy's output with respect to changes in population and technological change.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your accountView this answer
With an immediate doubling of the size of labor force, GDP per capita will fall immediately. This is because increased labor cannot be used in...
See full answer below.
Become a member and unlock all Study Answers
Start today. Try it nowCreate an account
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
fromChapter 19 / Lesson 4
Learn the definition of economic growth and understand its causes. Compare economic growth vs. economic development and study an economic growth example.
Related to this Question
- What are the implications of a constant return to a scale production function in the Solow model of economic growth?
- According to the Solow model, how would each of the following affect consumption per worker in the long run (that is, in the steady state)? Explain. -The destruction of a portion of the nation's capi
- In the Solow growth model, suppose that the population growth rate declines. Explain what the steady state effects are and why.
- In the Solow growth model, suppose the population growth rate declines. Explain what the steady state effects are and why.
- In the Solow growth model, what happens in the steady state if total factor productivity declines?
- In the Solow model, describe the effects of a permanent increase of foreign aid. (a) What happens to output, saving, actual investment, and consumption in the short run? (b) Are the capital-labor ra
- What happens in the Solow growth model in the steady state if total factor productivity declines?
- Discuss the Solow Model. How does saving, consumption, production, income, and population affect economic growth?
- What are the implications of reliance on a continuously growing economy? Can any nation sustain a healthy, steady-state economic model? What would that look like?
- Suppose that the government raises the minimum wage and in doing so causes real wages to increase throughout the economy. What would be the effect on the micro economy in relation to the quantity dem
- Explain why, according to Solow model, an increase in the savings rate leads initially to growth in income per capita, but this growth eventually stops.
- (a) How does Solow model work in third world countries where population growth is very high? (b) Give examples.
- 1. In the Solow growth model, how does the savings rate affect the steady-state income level? 2. How does it affect the steady-state rate of growth?
- What is the Solow model of Macroeconomics?
- What effect does the economy have on population growth?
- Suppose population growth surges rapidly. What would be the economic effect of this situation?
- According to Solow's model of economic growth, what determines the rate at which a nation's income per person grows?
- How does the crowding out effect modify the implications of the Keynesian model with regard to the effectiveness of fiscal policy?
- According to the Keynesian AD/AS model, what would the consequences of an increase in natural resource scarcity be for the macroeconomy?
- Diagrammatically analyze the effects of an increase in population growth in the Solow-Swan model with exogenous technology and how this affects the short run and long run.
- What are the key differences between the Malthusian and Solow models of economic growth?
- An increase in population or population growth rate has the exact opposite effect in the Solow and Romer models. Explain how and why these two models differ.
- What is the Solow Growth Model?
- What are important outcomes of growth models such as Harrod-Domar and Solow models? Explain carefully how these results arise. In what way did the developmentalists practically approach the investmen
- Assume that New Zealand's macroeconomic equilibrium is equal to potential GDP. What would happen if the demand for New Zealand's wool products falls? Using the AD-AS model, explain carefully, the immediate and long term effects of the event towards the ec
- What effect does population growth have on economic development?
- Why is it important for a good economic model to predict cause and effect?
- How can we get sustained growth in Solow model? Is it possible to achieve it by increasing saving? Or do we need something else? What is MPS in Solow model? What is MPC? Define investment per capita (
- What are the three processes that change the size of the labor force (L) and/or the economy s supply of capital (K) between each pair consecutive periods in Solow s model of economic growth? Under what conditions do they not change capital per worker (k)?
- How do changes in aggregate demand affect changes in prices, GDP, and unemployment? How does the unemployment level fit into the macroeconomic model?
- What is the impact of an increase in marginal propensity to save in a simple economy?
- Explain why the Solow (neoclassical growth) model predicts conditional convergence of per capita incomes across countries, even if there is increasing inequality amongst them.
- Using a neoclassical model, what will the level of cyclical unemployment be when an economy is producing at potential GDP? A. zero B. never 0% C. 1% - 3% D. 3% - 5%
- Suppose there are two identical economies, except that each has its own saving rates. Following the model of a closed economy, what would be the consequences on living standards and growth?
- Macroeconomics: What is the effect of increase in government purchases on both the product and labor markets?
- Explain the term Potential GDP. Briefly discuss potential GDP in the neoclassical model, including how the curve is shown, what it determines, and how it operates over time.
- What are the effects of changes in Aggregate Demand (AD) according to Keynesian Economic Theory?
- Using the Solow model, explain the effect on the economy of a reform that eases the immigration procedure, leading to an increase in the rate of immigration.
- Define the way economists define the Labor Force Participation Rate - LFPR. What is its current level in the US? What is its significance for long-term economic growth?
- Explain how an increase in productivity impacts the AD/AS model and state the effect on the price level and aggregate output in this economy.
- Describe how the substitution effect and the income effect influence the slope of an individual's supply curve of labor.
- Explain how the steepness of the short-run aggregate supply curve affects the government's ability to use fiscal policy to change real GDP.
- How do macroeconomics affect an individual?
- Beginning from a steady state in the Solow growth model, explain how an increase in the savings rate will affect the levels and growth rates of capital and output per worker. A) How does population growth affect the steady state levels of capital and outp
- What effect do economies of scale have on the market structure of an industry?
- What does the Solow model say about the importance of improving technology for long-term economic growth?
- Use Solow Growth model to explain how raised saving rate effects capital per worker and output per worker in short run and long run. Start with an initial steady state and show the new steady state on
- Currently the economy is operating at the full employment equilibrium GP of 900. Suddenly oil becomes short supply. Using the AD/AS model, explain what would happen to equilibrium GDP, unemployment, a
- Assume the economy is initially in equilibrium, and then firms expect future total factor productivity to decrease. Using the New Keynesian Model framework: Explain and show graphically the impacts of
- Explain, in your own words, what the rate of population growth exerts theoretically uncertain effects on economic growth.
- Explain how the Solow model can or can not capture the demographic transition.
- What are some of the consequences of not measuring/including household labor and production when we study the macro-economy?
- If a neoclassical model shows increasing wages in the economy over the long run, what is likely to occur?
- Explain briefly the endogenous economic growth model.
- Why is the Solow Model considered an "exogenous" growth model and the Romer Model an "endogenous" growth model?
- What is the best way to describe macroeconomics? What does a production possibilities curve show?
- What is essential for economic growth as it relates to macroeconomics, and why?
- What influence does microeconomics have on macroeconomics?
- What are the classical economic model and the Keynesian economic model? What is the impact on the aggregate demand and supply curves?
- What is the effect of health on the productivity and economic development of a nation?
- What effect does relative scarcity have on the economy?
- What are the effects of macroeconomics objectives to economic development?
- According to classical macroeconomic theory, what determines the size of a nation's real aggregate income? Based on that theory, what sorts of public policies could be used to expand aggregate income? Give at least two specific examples.
- What is the difference between the Solow Model and the Romer Model in the short-run and the long-run?
- Within a PPF framework, explain how an increase in the population affects the economy.
- Explain how slower income growth would affect the aggregate demand curve.
- What is the difference between the saving rate in Solow Growth Model and marginal propensity to consume in Keynes theory?
- How does Keynesian Economics relate to GDP?
- What macroeconomic principles affect unemployment trends? What macroeconomic principles does the unemployment affect?
- Explain why the supply of labor is a critically important variable in macroeconomics.
- What do we expect to happen to the MPC of an individual as his or her income increases? Explain.
- What are the microeconomics effects of world trade? The macroeconomic effects?
- How do macroeconomics affect a business?
- What impacts a small business faster, macroeconomics or microeconomics?
- What does capital accumulation in the Solow model come from?
- What are the macroeconomic consequences of a budget deficit when the economy is operating at full employment?
- Suppose short-run aggregate supply in the economy is x=.5+.5(Y-10). What is the equilibrium output of the economy?
- What factors can affect the full employment, in classical macroeconomic models?
- In the keynesian model, what comes from a larger marginal propensity to consume?
- Explain what crony capitalism is and what effects it has on the economy using the production possibilities frontier (PPF) model.
- Explain the effects of fiscal policies on the economy's production and employment.
- How does microeconomics influence macroeconomics?
- Assume a small economy is open. According to classical economic theory, explain what will be the long run effects of an increase in taxes. You need to present and discuss a formal model in detail for
- Why is it important to work out the microfoundations of a macroeconomics model?
- Explain the key properties of aggregate production function of Solow's economic growth model.
- In the Solow model, if k = 8, y = 24, and s = 0.25, what is c?
- Explain the consequences of an inflationary gap using the aggregate expenditures model.
- When evaluating economic growth, you will find that we are concerned about how much output we can produce. What are the implications of evaluating economic growth on the overall economy?
- How does higher income inequality affect economic growth in an economy?
- What is steady-state growth in the Swan-Solow growth model and how is it reached? What determines the steady-state growth rate in this model?
- Explain to what extent the neoclassical growth theory (e.g. Solow Swan model) that emphasizes capital accumulation and total factor productivity can explain the East Asian growth miracles with particular references to the growth experiences of Korea and S
- Is the impact of higher national saving on economic growth related to microeconomics or macroeconomics? Explain.
- The purpose of the Keynesian analysis is to explain what determines the: (a) size of the labor force (b) price level (c) amount of money required in the economy (d) levels of national income, output, and employment
- What is the effect of economic growth/development on the level of income and or poverty?
- In the Keynesian system, what forces operate to restore GDP to its equilibrium value if disequilibrium prevails?
- Use the classical model: What effect does an increase in the population growth rate have on the technique in use and the profit rate in the model?
- How does the neoclassical growth model explain economic growth?