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      Question

      In the long run, the steady state rate of growth of a

      capitalist economy 
      A Falls with the savings propensity Correct Answer Incorrect Answer
      B Rises with the incremental capital output ratio Correct Answer Incorrect Answer
      C Rises with the savings propensity but falls with the incremental capital output ratio Correct Answer Incorrect Answer
      D Falls with the savings propensity but rises with the incremental capital output ratio Correct Answer Incorrect Answer

      Solution

      In the long−run, the steady state rate of growth of a capitalist economy rises with savings propensity but falls with the incremental capital output ratio. As from Harrod-Domar Model we have, Gy = s / q .

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