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      Question

      In the Solow model, what is the effect of an increase in

      the saving rate on the long-term growth rate of an economy?
      A It leads to a permanent increase in the long-term growth rate of output. Correct Answer Incorrect Answer
      B It has no effect on the long-term growth rate of output, but increases the steady-state level of output. Correct Answer Incorrect Answer
      C It decreases the long-term growth rate of output by causing higher capital accumulation Correct Answer Incorrect Answer
      D It causes both the long-term growth rate of output and the steady-state level of output to increase permanently Correct Answer Incorrect Answer

      Solution

      The correct answer is B

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