The Solow model is an important formal model of economic growth. Assume that the production function is Y = F(K,N) = zK° N¹-a, where 0 < a < 1. Production is constant returns to scale. We use lowercase to denote variables in per capita terms. The evolution of capital is given by K' = (1 − d)K + I. Assume, as we have done so far, that I = sY and that N' = (1+n)N. Using these, find the correct equation for the evolution of capital-labor ratio, k. ○ k' ska +(1-d)k 1+n Ok' = szkª+(1–d)k 1+n sz²ka +(1-d)k k' = Ok' 1+n skan¹-a+(1-d)k 1+n

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Chapter1: Making Economics Decisions
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The Solow model is an important formal model of economic growth. Assume that the production
function is Y = F(K,N) = zK° N¹-a, where 0 < a < 1. Production is constant returns to
scale. We use lowercase to denote variables in per capita terms.
Transcribed Image Text:The Solow model is an important formal model of economic growth. Assume that the production function is Y = F(K,N) = zK° N¹-a, where 0 < a < 1. Production is constant returns to scale. We use lowercase to denote variables in per capita terms.
The evolution of capital is given by
K' = (1 − d)K + I.
Assume, as we have done so far, that I = sY and that N' =
(1+n)N.
Using these, find the correct equation for the evolution of capital-labor ratio, k.
○ k'
ska +(1-d)k
1+n
Ok' = szkª+(1–d)k
1+n
sz²ka +(1-d)k
k' =
Ok'
1+n
skan¹-a+(1-d)k
1+n
Transcribed Image Text:The evolution of capital is given by K' = (1 − d)K + I. Assume, as we have done so far, that I = sY and that N' = (1+n)N. Using these, find the correct equation for the evolution of capital-labor ratio, k. ○ k' ska +(1-d)k 1+n Ok' = szkª+(1–d)k 1+n sz²ka +(1-d)k k' = Ok' 1+n skan¹-a+(1-d)k 1+n
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