Suppose that the depreciation rate increases. In the Solow growthmodel, determine the effects of this on the quantity of capital per worker and on output per worker in the steady state.

In the steadystate, an increase in the depreciation rate will

cause a movement up

not affect

cause a movement down

shift to the right

shift to the left

the curve (n+d)k*, and will

cause a movement down

shift up

cause a movement up

shift down

not affect

theper-worker productionfunction, szfk*. Therefore, quantity of capital per worker will

remain the same

increase

decrease

and output per worker will

decrease.

increase.

remain the same.

The reason for this is an increase in the depreciation rate will make it

tougher

easier

to build capital and will require

less

the same amount of

more

current savings to keep the amount of capital per worker constant.