If the saving rate increases in the Solow growth model, then in the steady state the growth rate of capital per worker is:
A)higher.
B)unchanged.
C)lower.
D)rising.

Question

Quizplus · Accepted Answer

In the Solow growth model, an increase in the saving rate leads to a higher level of capital per worker in the steady state, but the growth rate of capital per worker remains unchanged. This is because, in the steady state, the economy grows at a rate determined by technological progress and population growth, not by the saving rate.

If the Saving Rate Increases in the Solow Growth Model