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    Question

    In the Solow growth model, steady-state growth occurs

    when:
    A Capital stock is zero Correct Answer Incorrect Answer
    B Savings rate is zero Correct Answer Incorrect Answer
    C Labor force stops growing Correct Answer Incorrect Answer
    D Investment equals depreciation Correct Answer Incorrect Answer

    Solution

    Solution: The steady state occurs when capital per worker (k) is constant: sf(k)=(δ+n)k Where s = savings rate, f(k) = output per worker, δ = depreciation, n = labor growth. At this point, net investment is zero, and output per worker stabilizes.

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