Question

In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state, output per effective worker grows at a ______ percent rate.

Answer 1

Answer:

0

Explanation:

This is because, even though both ratios are growing, the efficiency of labor ratio grows a little bit more than the population, and that prevents the population to actually make a positive difference and therefore, the output per effective worker cannot start to grow.