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viva [34]
3 years ago
10

The Solow model demonstrates that A) in the absence of productivity growth, economic growth will turn negative in the long run.

B) in the absence of productivity growth, economic growth will reach a steady state of zero per-capita growth in the long run. C) productivity growth will inevitably decline due to diminishing marginal productivity. D) productivity growth must exceed the rate of growth in the population to avoid a steady state in the long run
Business
1 answer:
IRINA_888 [86]3 years ago
4 0

Answer:

Option B: In the absence of productivity growth, economic growth will reach a steady state of zero per-capita growth in the long run

Explanation:

The Solow model

This is the production function that gives people enough free hand or rooms to consider the accumulation of capital as a useful tool of long-run economic growth it is a dynamic model. Even if it can only mathematically solve for the endogenous variables in steady state, they are subscripted by time because the model holds at all points in time. And its addition to the production model includes capital stock is therefore not exogenous and the accumulation of capital is a possible tool of long-run economic growth.

Solow Model Strengths includes;

1. It gives a theory that shows how rich a country is in the long run( e.g. steady state)

2. It helps to understand differences in growth rates by using the principle of transition dynamics

Solow Model Weaknesses includes.

1. If the main tool studied in the model is investment in physical capital, that explains only a small fraction of the differences in income across countries

2. The model do not clearly explain differences in investment rates etc.

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Answer:

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1. Closing Entries:

No. Account Title             Debit      Credit

901 Income Summary  $33,100

612 Depreciation expense

—Equipment                                  $3,000

622 Salaries expense                  22,000

637 Insurance expense                 2,500

640 Rent expense                         3,400

652 Supplies expense                  2,200

To close expenses to the Income Summary.

404 Services revenue $44,000

901 Income Summary                    $44,000

To close Service Revenue to the Income Summary.

318 Retained earnings $37,600

901 Income Summary (Retained Earnings) $37,600

To close the Retained Earnings of prior year to Retained Earnings section of the Income Summary.

901 Income Summary

    (Retained Earnings) $7,000

319 Dividends                                    $7,000

To close the Dividends to the Retained Earnings section of the Income Summary.

2. CRUZ COMPANY

Post-Closing Trial Balance

As of December 31

No. Account Title             Debit      Credit

101 Cash                        $ 19,000

126 Supplies                    13,000

128 Prepaid insurance     3,000

167 Equipment               24,000

168 Accumulated depreciation

—Equipment                                  $ 7,500

307 Common stock                        10,000

318 Retained earnings                    41,500

Totals                        $ 59,000   $ 59,000

Explanation:

a) Data and Calculations:

CRUZ COMPANY

Trial Balance

As of December 31

No. Account Title             Debit      Credit

101 Cash                        $ 19,000

126 Supplies                    13,000

128 Prepaid insurance     3,000

167 Equipment               24,000

168 Accumulated depreciation

—Equipment                                  $ 7,500

307 Common stock                        10,000

318 Retained earnings                   37,600

319 Dividends                  7,000

404 Services revenue                   44,000

612 Depreciation expense

—Equipment                    3,000

622 Salaries expense  22,000

637 Insurance expense 2,500

640 Rent expense         3,400

652 Supplies expense 2,200

Totals                        $ 99,100    $ 99,100

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Revenue                   $44,000

Expenses                   (33,100)

Net Income              $10,900

Retained Earnings    37,600

Dividends                  (7,000)

Retained Earnings $41,500

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