Refer to the Solow Growth Model (discussed in class) to determine which of the following statements is CORRECT:O When investment per worker is less than the annual depreciation rate of the capital stock, output per worker and capital per worker (or capital-labor ratio) increases until the economy reaches the "steady state" levels of output per worker and capital per worker. O When investment per worker is greater than the annual depreciation of the capital stock, output per worker and capital per worker (or the capital-labor ratio) increase until the economy reaches the "steady state" output per worker and capital per worker levels. O Capital per worker and labor per worker increase as the economy enters a recession and decrease during economic expansions due to the elasticity of input substitution. O Capital per worker and labor per worker decrease since the income effect is greater than the substitution effect.

When investment per worker is greater than the annual depreciation of the capital stock, output per worker and capital per worker increase until the economy reaches the steady state levels of output per worker and capital per worker.

According to the Solow Growth Model, the correct statement is:
"When investment per worker is greater than the annual depreciation of the capital stock, output per worker and capital per worker (or the capital-labor ratio) increase until the economy reaches the 'steady state' output per worker and capital per worker levels."

Here's a step-by-step explanation:
1. The Solow Growth Model is an economic model that analyzes long-term economic growth by focusing on factors such as capital accumulation and technological progress.
2. In the model, investment refers to the amount of resources allocated to increase the capital stock, which includes physical capital like machinery and equipment.
3. Depreciation, on the other hand, refers to the loss of value or wear and tear of the capital stock over time.
4. When investment per worker is greater than the annual depreciation rate of the capital stock, it means that the economy is investing more in new capital than what is being lost due to depreciation.
5. This leads to an increase in the capital stock, which in turn increases the output per worker and the capital per worker (or capital-labor ratio).
6. As the economy continues to invest in new capital, the output per worker and capital per worker keep increasing until the economy reaches a point called the "steady state."
7. The steady state refers to the point where the output per worker and capital per worker levels stabilize, indicating a balanced and sustainable growth rate.
8. At the steady state, the rate of investment per worker equals the annual depreciation rate, resulting in a constant capital stock and output per worker.
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