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Question

 In the basic Solow model of growth

A An increase in the savings rate raises the steady-state growth rate Correct Answer Incorrect Answer
B An increase in the growth rate of population lowers the steady-state growth rate Correct Answer Incorrect Answer
C An increase in the growth rate of population has no impact on the steady-state growth rate Correct Answer Incorrect Answer
D An increase in the savings rate has no impact on the steady-state growth rate Correct Answer Incorrect Answer
E None Correct Answer Incorrect Answer

Solution

A higher saving rate does result in a higher steady-state capital stock and a higher level of output. The shift from a lower to a higher steady-state level of output causes a temporary increase in the growth rate.

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