Refer to the following figure when answering the following questions. Figure 5.1: Solow Diagram -In Figure 5.1, at K₁, net investment is ________ and the economy ________. A) negative; will grow B) positive; is in its steady state C) zero; is in its steady state D) positive; will grow E) negative; will contract

Question

Quizplus · Accepted Answer

Net investment is positive when investment exceeds depreciation. In this case, the economy will grow because the increase in capital stock will lead to an increase in output.

Refer to the Following Figure When Answering the Following Questions