In the neoclassical growth model, an increase in the savings rate
A)raises the steady-state level of output
B)lowers the steady-state level of output
C)raises the long-term economic growth rate
D)lowers total factor productivity
E)both A and C

Question

Quizplus · Accepted Answer

An increase in the savings rate in the neoclassical growth model raises the steady-state level of output by allowing more investment in capital, which increases the capital stock and output in the long run. However, it does not affect the long-term economic growth rate, which is determined by exogenous factors like technology growth.

In the Neoclassical Growth Model, an Increase in the Savings