The Solow growth curve is represented by a vertical line at the Solow growth rate because I. it does not depend on the rate of inflation. II. there is an underlying assumption of strong money neutrality. III. it does not depend on the stock of factors of production.

Question

Quizplus · Accepted Answer

The Solow growth curve is vertical because it represents the long-term growth rate of an economy, which is determined by factors like technology and resources, not inflation (I). It assumes money neutrality, meaning changes in the money supply do not affect real variables in the long run (II). However, it does depend on the stock of factors of production, so III is incorrect.

The Solow Growth Curve Is Represented by a Vertical Line