3. Consider a closed economy where the aggregate production function is In the framework of the Solow model 5without technical progress or population growth), indicate for each of the following statements whether it is correct by checking the appropriate box: (Memory aid: ) a) In the steady state, capital per worker is equal to b) In the steady state, output per worker is equal to c) Returns to scale are increasing in this economy; d) Returns to scale are decreasing in this economy; e) None of the above statements is correct

Answers (a) (b) (c) (d) (e)

Q3

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4.

Consider the following graph representing the Solow model: The current per capita capital stock is equal to . Based on this graph, indicate for each of the following statements whether it is correct by checking the appropriate box: a) The savings rate of this economy is 0.8; b) Consumption per capita is equal to 350; c) Next year (in t+1), the capital stock per worker will be equal to 2300; d) The rate of depreciation of capital is 1/3; e) None of the above statements is correct. Answers (a) (b) (c) (d) (e)

Q4

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