competitive equilibrium of solow growth model is acheived when the econony reaches steady state. true or...

competitive equilibrium of solow growth model is acheived when the econony reaches steady state. true or false and why?

Expert Solution

Hello, I wish you are having a beautiful day. Please consider giving thumbs up if you Like this answer before you leave. Firstly let us understand the meaning of Steady State Equilibrium : A steady states economy seeks to find an equilibrium between production growth and population growth. The economy aims for the efficient use of natural resources but also seeks fair distribution of the wealth generated from the development of those resources. The answer with explanation of the question asked above is : (True) because In Solow model the equilibrium growth path is a steady state in which level variables such as K and Y grow at constant rates and the ratios among key variables are stable. The steady state is calculated by solving the following equation :- k' = k => (1 + g)k = (1 – d)k + sak^b

Rahul Sunny answered 2 years ago

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