Question

In Solow's growth model, the output per capita is a function of:

• A. Capital labor ratio
• B. Capital output ratio
• C. Labor output ratio
• D. Technological progress

Hint:

In the Solow model, output per capita is mainly determined by the capital per worker ratio and technological progress.

Answer 1

The Correct Option is A

Step 1: Understanding the Solow growth model.
The Solow model posits that output per capita is a function of the capital-labor ratio and the level of technology. Its focus is on the long-run equilibrium of output per worker, driven by capital accumulation and technological advancement.

Step 2: Analysis of options.
- (A) Capital labor ratio: Correct. The capital per worker, or capital-labor ratio, is a primary determinant of output per capita within the Solow model.
- (B) Capital output ratio: Incorrect. The capital-output ratio does not directly determine output per capita in the Solow model.
- (C) Labor output ratio: Incorrect. The labor-output ratio is not a principal determinant of output per capita in the Solow model.
- (D) Technological progress: Indirectly related. While technological progress influences output per capita, the capital-labor ratio is the primary determinant in the Solow model.

Step 3: Conclusion.
Option (A) is the correct answer because the capital-labor ratio directly dictates output per capita in the Solow model.