In the Solow Model, an increase in the capital stock (K) by 10 percent, (holding L constant) will result in an

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In the Solow Model, an increase in the capital stock will lead to an increase in output (Y), but the increase in Y will be less than the increase in K. This is because the production function exhibits diminishing marginal product of capital, meaning that the marginal product of capital decreases as the capital stock increases. Therefore, an increase in K will lead to a smaller increase in output than the increase in K itself.

In the Solow Model, an Increase in the Capital Stock