Answer :
In the Solow model, the assumption of constant returns to scale implies that output per worker is a function of only the stock of capital per worker. The correct option is 3.
In the Solow model, the assumption of constant returns to scale implies that output per worker is a function of only the capital per worker.
This key principle establishes that when all inputs in the production function are scaled up by a certain proportion, output increases by the same proportion, meaning that the production function can be written in per capita (per worker) terms.
Therefore, regardless of the total amount of labor or the total stock of capital, what matters for determining output per worker is the amount of capital that's available to each worker, adjusted for technology.
The Solow model focuses on the relationship between investment, saving, and the growth of capital and output over time. With a constant savings rate, as the economy saves and invests, the capital stock grows.
However, due to diminishing returns to capital, the growth rate of the capital stock will eventually slow down and approach a balanced-growth path (BGP) where per capita quantities.
such as capital, output, and consumption, do not grow, while the levels of total capital, output, and consumption grow at the rate of population growth. The correct option is 3.
