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.
In the Solow model, output per capita is determined by the amount of capital per worker (capital labor ratio) and the level of technology. The model focuses on the long-run equilibrium output per worker determined by capital accumulation and technological progress.

Step 2: Analysis of options.
- (A) Capital labor ratio: This is correct. The capital per worker (capital labor ratio) is a key determinant of output per capita in the Solow model.
- (B) Capital output ratio: This is incorrect. The capital output ratio is not directly related to output per capita in the Solow model.
- (C) Labor output ratio: This is incorrect. The labor output ratio is not a key determinant in the Solow model for output per capita.
- (D) Technological progress: This is indirectly related. Technological progress does affect output per capita, but the capital labor ratio is the main determinant in the Solow model.

Step 3: Conclusion.
The correct answer is (A), as the capital labor ratio directly determines output per capita in the Solow model.