In Solow's exogenous growth model,the economy reaches a stable steady state because

Question

Quizplus · Accepted Answer

In Solow's exogenous growth model, the economy reaches a stable steady state because the marginal return of capital is decreasing. As capital accumulates, the marginal product of capital diminishes, leading to a decline in the rate of economic growth. This ultimately leads to the economy reaching a steady state where the capital stock and output per capita remain constant. Therefore, choice A is the correct answer.

In Solow's Exogenous Growth Model,the Economy Reaches a Stable Steady