In the Simple Solow Growth Model, with Constant Technology and Constant

question 13

Multiple Choice

In the simple Solow growth model, with constant technology and constant returns to scale, GDP per capita can only increase if:

• A) capital increases at the same rate as labour increases.
• B) capital increases at a slower rate than labour.
• C) capital increases at a faster rate than labour.
• D) increasing marginal returns to capital exists.

---

Definitions:

GDP

The total value of all ultimate goods and services generated within a country during a designated period is known as the Gross Domestic Product.

GDP Deflator

An economic metric that converts output measured at current prices into constant-price output, making it possible to compare the real value of aggregate production across different periods.

Base Year

A reference year used in economic index calculations, price comparisons, and economic data to account for the effects of inflation.

Unreported Income

Earnings not declared to tax authorities, often to evade taxation; part of the informal or shadow economy.