Solow Growth Model Diagram Problem - Shocks & Effects on Steady State per-worker Capital & Output

Working with the Solow Growth Model's diagram, we see how steady state values of per-worker-capital and per-capita production change given changes in the savings rate, depreciation, the growth rate of the labor force, and changes to the productivity of each worker.

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Draw a well-labeled graph that illustrates the steady state of the Solow model with population growth. Use the graph to find what happens to steady-state capital per worker and income per-worker in response to each of the following exogenous changes.

0:58 a. A change in consumer preferences increases the saving rate.

5:25 b. A change in weather patterns increases the depreciation rate.

8:30 c. Better birth-control methods reduce the rate of population growth.

12:04 d. A one-time, permanent improvement in technology increases the amount of output that can be produced from any given amount of capital and labor.


From Mankiw's Macroeconomics (8th ed), Economic Growth Part 1 (Chapter 8) Problem 5
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