Neco 2024 Economics Question 10

Practice objective / multiple choice question 10 from the 2024 Neco Economics examination.

Neco 2024 Economics Objective / Multiple Choice Hard Difficulty
Question 10 NECO • 2024 • ECONOMICS • objective

An economy follows the Solow growth model with a production function per effective worker \(y = k^{0.5}\). The parameters are: savings rate \(s = 20\%\), depreciation rate \(\delta = 5\%\), population growth rate \(n = 2\%\), and technological progress rate \(g = 1\%\).\n(a) Compute the steady‑state capital per effective worker \(k^*\) and steady‑state output per effective worker \(y^*\).\n(b) State the steady‑state growth rate of output per worker.\n(c) If the savings rate rises to \(s = 25\%\), find the new \(k^*\) and the percentage increase in steady‑state output per worker.

Answer Options

A. k* = 6.25, y* = 2.5, growth = 2%, new k* = 9.7656, output increase = 30%
B. k* = 5.00, y* = 2.24, growth = 1%, new k* = 8.5000, output increase = 20%
Correct Answer C. k* = 6.25, y* = 2.5, growth = 1%, new k* = 9.7656, output increase = 25%
D. k* = 7.00, y* = 2.65, growth = 1%, new k* = 10.2000, output increase = 28%
Correct Answer
C
Correct Option:
k* = 6.25, y* = 2.5, growth = 1%, new k* = 9.7656, output increase = 25%

About This Question

This is Neco 2024 Economics Question 10. It is one of the objective questions from the 2024 Neco Economics examination.

Difficulty level: Hard .

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