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2022 PEA Q14

Solow model with saving ss, depreciation δ\delta, labor growth nn, no technological progress. Steady-state capital--output ratio?

Reveal answer and solution

Answer

A

Solution

  1. 1

    At steady state, sf(k∗)=(n+δ)k∗s f(k^*) = (n+\delta) k^*, so

  2. 2
    k∗f(k∗)=K∗Y∗=sn+δ. \frac{k^*}{f(k^*)} = \frac{K^*}{Y^*} = \frac{s}{n+\delta}.

Answer structure / marking notes

The steady-state condition equates actual investment to break-even investment.

Content note

Imported from public/resources/isi/msqe/solutions/pea/2022/ISI_MSQE_PEA_2022_Solutions.tex. Question wording is retained from the available local TeX source; incomplete option blocks or ambiguous source status are flagged for review.