In the Solow growthmodel, suppose that the marginal product of capital increases for each quantity of the capitalinput, given the labour input. Show the effects of this on the aggregate production function. Determine the effects on the quantity of capital per worker and on output per worker in the steady state. Explain the results.

In the steadystate, an increase in the marginal product of capital for each quantity of the capital input will

cause a movement down

shift to the right

cause a movement up

shift to the left

not affect

the curve (n+d)k, and will

cause a movement down

cause a movement up

not affect

shift down

shift up

theper-worker productionfunction, szf(k). Therefore, quantity of capital per worker will

decrease

remain the same

increase

and output per worker will

remain the same.

increase.

decrease.

For a given savingsrate, more effective capital implies

more

less

the same amount of

savings, and in the steadystate, there is

more

the same amount of

less

capital and

the same amount of

more

less

output.