Economic Growth

Correct Answer: The savings rate, which affects the level of capital accumulation

The Solow growth model suggests that the steady-state level of output per worker is determined by several key factors. The savings rate is one of these critical factors, as it affects the level of capital accumulation in the economy. A higher savings rate leads to more investment in capital, which increases the capital stock and, consequently, the output per worker in the steady state. The rate of technological progress, while important for economic growth, does not directly determine the steady-state level of output per worker in the Solow model. Instead, it influences the growth rate of output per worker in the steady state. Similarly, the growth rate of the labor force affects the growth rate of total output in the steady state, but it does not directly determine the level of output per worker. In the long run, the capital-labor ratio adjusts to maintain the steady-state level of output per worker, given the savings rate and the rate of technological progress.

Correct Answer: Technological progress that allows workers to produce more output per hour worked

Technological progress is the most significant contributor to increasing labor productivity in the context of economic growth. When technology advances, it enables workers to produce more output per hour worked. This directly increases labor productivity, which is defined as the amount of output produced per unit of labor input. Increases in population growth rates expand the available labor force but do not necessarily increase the productivity of each worker. Government policies encouraging longer working hours may increase total output, but they do not inherently improve the efficiency or productivity of each hour worked by a laborer.

Correct Answer: Investment in education and training can lead to increased productivity and long-term economic growth.

Investment in education and training can lead to increased productivity and long-term economic growth. Human capital, which refers to the knowledge, skills, and abilities of individuals, is a crucial factor in driving economic growth. When a country invests in education and training, it enhances the quality of its workforce, leading to increased productivity and innovation. This, in turn, contributes to long-term economic growth. The other answers are incorrect because: - Human capital has a significant impact on economic growth and cannot be considered limited compared to physical capital investments. - While there may be diminishing returns to education and training over time, it is unlikely to lead to economic stagnation. Continuous investment in human capital is necessary to maintain and further enhance economic growth.