In the steady state of Solow's exogenous growth model, an increase in the savings rate

Question

Quizplus · Accepted Answer

In the steady state, output per worker and capital per worker are both constant. Therefore, an increase in the savings rate, which leads to higher investment, will result in an increase in capital per worker. Since capital is one of the factors that determine output, an increase in capital per worker will also result in an increase in output per worker. Therefore, choice A is the correct answer.

In the Steady State of Solow's Exogenous Growth Model, an Increase