A7. Consider the basic Solow model with production function Y = ment growth. Which of the following must be false if the saving rate increases? and no employ- (a) consumption per worker decreases in the long run (b) total capital stock increases in the long run (c) the growth rate of capital per worker increases in the long run (d) the growth rate of capital per worker increases in the short run

ENGR.ECONOMIC ANALYSIS
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A7. Consider the basic Solow model with production function Y - Ka N¹-a and no employ-
=
ment growth. Which of the following must be false if the saving rate increases?
(a) consumption per worker decreases in the long run
(b) total capital stock increases in the long run
(c) the growth rate of capital per worker increases in the long run
(d) the growth rate of capital per worker increases in the short run
Transcribed Image Text:A7. Consider the basic Solow model with production function Y - Ka N¹-a and no employ- = ment growth. Which of the following must be false if the saving rate increases? (a) consumption per worker decreases in the long run (b) total capital stock increases in the long run (c) the growth rate of capital per worker increases in the long run (d) the growth rate of capital per worker increases in the short run
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Step 1 Introduction to the concept

The Solow Growth model is an exogenous growth model that explains the impact of change in the savings rate, and population growth rate, and investment on output. This model is a long-run economic growth model that focuses on long-run economic growth by accumulating capital and increasing productivity through technological progress. 

Advancement in technology leads to a rise in the productivity of the nation and the total output in the nation increases which further increases the GDP of the nation. The  GDP of the nation is the indicator of economic growth. 

As per the Solow Growth model, the working labor force and technological advancement are the key factors for the Economic growth of the nation.  

 

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