Consider the Solow-Swan growth model, with a savings rate s, a depreciation rate δ, and a population growth rate n. The production function is given by
Y = AK + BK0.5 L0.5
where A and B are positive constants. Note that this production is a mixture of Romer’s AK model and the neoclassical Cobb-Douglas production function.
(g) Is the law of diminishing returns (to capital) necessary for the Solow- Swan theory of growth to predict zero growth?
(h) Is the law of diminishing returns (to capital) suficient for the Solow- Swan theory of growth to predict zero growth?