In the Solow Model with Technological Progress, by Increasing the Efficiency

question 33

Multiple Choice

In the Solow model with technological progress, by increasing the efficiency of labor at rate g:

• A)the real wage and the real rental price of capital both grow at rate g.
• B)the real wage grows at rate g but the real rental price of capital is constant.
• C)the real wage is constant but the real rental price of capital grows at rate
• D)g. both the real wage and the real rental price of capital are constant

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Definitions:

Discount Rate

The interest rate charged to commercial banks and other depository institutions by the central bank for loans received from the central bank's discount window; it is also used in discounted cash flow analysis to determine the present value of future cash flows.

Payback Period

The duration required for an investment to recoup its initial outlay in terms of profits or savings.

Initial Investment

The amount of money used to start a project, business, or investment, often encompassing costs such as capital expenditures and working capital.

Cash Flows

The net amount of cash and cash-equivalents being transferred into and out of a business, showcasing the company's financial health and operational efficiency.