According to the Solow model, in the steady state, countries with high saving rates should have a:
A) low labor-output ratio.
B) low capital-output ratio.
C) high capital-output ratio.
D) high depreciation rate.
E) high A.

Question

Quizplus · Accepted Answer

According to the Solow model, the steady state value of the capital stock per worker, k*, is positively related to the saving rate. Therefore, countries with high saving rates should have a high capital-output ratio (Y/K), which means that they are able to produce more output per unit of capital invested.

According to the Solow Model, in the Steady State, Countries